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SINGAPORE: There is a saying that sometimes decades happen within a week. And sometimes weeks happen over decades.

It sure felt like the former when, over a period of 48 hours, Singapore’s telecommunications sector saw two major corporate manoeuvres that could reshape the landscape.

On Monday (Aug 11), Keppel announced the sale of its 83.9 per cent stake in M1’s telecom operations to Simba Telecom for S$1.43 billion (US$1.11 billion). Then on Tuesday, StarHub announced it would buy the remaining minority stake in MyRepublic Broadband that it does not already own.

The events have sent industry insiders and analysts scrambling to study their implications for the Singapore market. Meanwhile, consumers are wondering how this will affect their services, and most importantly, their subscription plans.

But why is this happening, and why now? Is the Singapore telco sector oversaturated? Is there not enough competition? Or is there too much?

BACK TO THREE

First, some context and background. Singapore has one of the highest mobile phone penetration rates in the world, with nearly 10 million subscriptions as of end-2024. This translates to a 165 per cent mobile penetration rate.

The first mobile phone call was made in Singapore in 1988, on Singtel’s first-generation (1G) mobile service. Nearly 10 years later, M1 launched in Singapore, followed by StarHub shortly after in 2000.

For many years, the three players dominated the market. Then in 2016, Australian telco TPG won the coveted fourth telco licence. TPG’s Singapore service was rebranded to Simba Telecom in 2022.

Singapore has also opened up to mobile virtual network operators, such as MyRepublic. MyRepublic's mobile business, which is not affected in the acquisition, holds a modest footprint in the broader market landscape. 

While Singapore had all these players, the three incumbents - Singtel, StarHub and M1 - have common parentage in Temasek Holdings.

This stands in contrast to other markets like South Korea or Hong Kong where multiple independent players own and operate telco entities. So unlike Singapore, fragmentation and competition is real in these markets, and often leads to genuinely aggressive pricing policies.

In Singapore, it is widely acknowledged that the entry of foreign players like TPG started putting downward pressure on fees for consumers. The local players had to respond in kind.

With M1 becoming part of Simba, it will (if requisite approvals are given) be a three-horse race - again. The dominant player remains Singtel.

DATA PLAY

What happens next depends on many factors, not least trends in revenue and margins, and the Infocomm Media Development Authority’s (IMDA) take on competition. 

The reality on the ground is that providing telephony services has become commoditised. Today it is largely a data play. When was the last time anyone connected with anyone else without using WhatsApp or other data services platforms to make a call or send a message?

In the Singapore context, the shift to data services by retail users has meant falling average revenue per user (ARPU), while hyper competition for new customers has led to extreme margin compression. 

In response, all three of the bigger players or incumbents have been shifting increasingly towards corporate clients via the provision of enterprise and infrastructure solutions. This requires investments in data centres and digital infrastructure. 

Both M1 and StarHub appear to be the worst hit by falling ARPU. M1 is still the smallest of the three incumbents in data streaming and network services, while StarHub was slugging it out against better resources and bigger Singtel for dominance in broadband.

MyRepublic and Simba were simply the newest spoilers coming into this market where the scramble for customers was already intensifying.

As Singtel’s latest results show - it posted a 320 per cent gain in first-quarter profit to S$2.88 billion largely on one-off gains - size matters in this business.

Even for this giant, which controls 45 per cent of the Singapore market, operating revenue during the April to June quarter slipped 0.6 per cent. This is despite the fact that Singtel has significant offshore assets, like Optus, contributing to both its topline and bottom line.

Given the circumstances, including the fact that Singapore is still a smallish market, consolidation was inevitable and overdue.

But analysts like Nirgunan Tiruchelvam of Alethea Capital argue that user fees in Singapore are still relatively high despite there being multiple players.

“We pay far more for services than in many other countries,” he told me, referring to the fact that most households pay in excess of S$100 per month for broadband, telco and data-related services.

WHAT’S NEXT?

The question then is, with fewer players, will consumers be coughing up even more for the mobile phone plans and broadband?

It is too early to say. But one thing is for sure: Aggressive pricing strategies will not help telcos recoup the high costs of capital investment in networks, infrastructure and data rollouts.

While IMDA will no doubt be looking at how the consolidation impacts competition, and ultimately prices, the reality is that competition need not just come from local players. The rapid progression of technology, and artificial intelligence in particular, has also opened up the possibility that telco and data services could ultimately be “open sourced” globally. 

In short, technology will reduce barriers to entry.

Whatever comes next, there is no denying that the events of this week mark a pivotal shift in Singapore’s telco landscape. And the impact of events of this week will happen over the decades to come.

Ven Sreenivasan is a former editor and journalist who has covered financial markets, economic and corporate news and aviation for more than 30 years.

Editor's note: This commentary has been amended to make clear that StarHub's acquisition does not include MyRepublic's mobile operations.