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Singapore eyeing fourth telco

The mobile telecoms industry in Singapore - comprising SingTel, M1, and StarHub - could see a long awaited shake up as a new challenger gears up for entry.

SGX
Source: Bloomberg

Two-year-old local broadband services provider MyRepublic is prepping to offer mobile services and will leverage its island-wide fibre connections. The start-up is budgeting up to $250 million for the first 12 to 18 months to build the new mobile network, and is currently in talks from financial institutions and overseas telcos for funding, according to reports.

Before MyRepublic can offer mobile services, it will need to buy airwaves and roll out base stations to provide signal coverage, with the network expected to be based on 4G.

In what will be good news for consumers, MyRepublic also has plans to offer unlimited data bundles, which have been phased out in Singapore.

Amid a boom in mobile data traffic growth, Singapore telcos have cut back on the data allowances offered over the past two years in the transition to 4G networks to recoup their investments. For example, the data allowance in a typical entry level package has been cut from 12GB to as low as 2GB. This has been in-line with other operators around the world in an effort to introduce more tiered pricing models.

The upstart move is a similar approach that MyRepublic has taken to gain an estimated 17% market share from incumbents in the fibre broadband space. For instance, this has included a VPN service to allow users to browse geo-restricted sites such as Netflix and Hulu. Its 1Gbps fibre broadband package at $49.99/month is also currently the cheapest per MB plan. At least one telco, StarHub, has flagged the intensifying competition as a concern for its broadband sales.

The Singapore government has long tried to introduce more competition in the industry, with calls for a new telco through previous auctions for 4G spectrum.

The industry had its last challenger more than a decade ago, when Richard Branson’s Virgin Mobile attempted to gain a foothold in the market with a joint venture with SingTel in 2001. Under the partnership, Virgin operated as a Mobile Virtual Network Operator (MVNO), allowing it to lease SingTel’s network and resell the capacity. However, the business folded the next year after only getting as much as a 1% market share and speculation that the margins from its MVNO contract were unsustainable.

With telco share prices seeing a recent run-up, the entry of a new challenger could prompt some profit-taking in the near term.

Trading day outlook

US equities rallied overnight despite disappointing data with Q1 GDP shrinking worse than expected, at -2.9%, against market expectations of -1.8%. This could be due to the market already expecting to see a bounce in Q2 growth.

Chinese markets have so far opened weaker, where IPOs will restart today after a four-month absence. Shandong Longda Meat Foodstuff, Wuxi Xuelang Environmental Technology, and Feitian Technologies will be the first to list on local bourses since February. There's been some concern over whether this will draw funds away from the market and lead to a liquidity crunch.

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