SINGAPORE (Apr 3): More than a year after a “trial” subscription service here, Singapore’s fourth mobile operator TPG Telecoms has launched its first commercial mobile plan in Singapore as it seeks to compete in an already heavily-saturated market.
Describing itself as the “best-value no contract plan” in the market today, the new SIM-only plan offers 50 gigabytes (GB) of data at $10 per month automatically renewed on a monthly basis. Excess data use will be charged at $1 per additional GB used. In contrast, Singtel sells a $25 plan that comes with 20GB, plus 10GB free. Another new operator Grid Mobile, meanwhile, charges $24.90 for 40GB.
Richard Tan, TPG Singapore’s acting chief executive, believes that this plan will appeal to bargain-hunters, foreign workers and children looking to purchase their first SIM card. In line with the company’s no-frills model back in Australia — where it is based — this plan is touted by Tan for its cost-effectiveness and simplicity. “We look forward to giving customers what they want — transparency and affordability,” says Tan, at the introduction of the plan during a virtual press conference held on March 31.
Recognising that just about everyone already has a mobile device, TPG is betting that it can find takers who won’t mind signing up for this plan for their second, or third devices. In any case, the company is confident this “one-size-fits-all” plan is sufficiently competitive to the general customer.
When TPG launched its trial subscription more than a year ago, it managed to draw some 400,000 users. It then offered up to 2GB of data per day at 4G speeds, though any usage above this daily limit was throttled to a slower speed. Other new players, such as Circles Life, managed to sign up an estimated 264,000 subscribers after two years. However, Circles Life operates as a mobile virtual network operator: It buys capacity from another operator and makes what it can from the margins.
In contrast, TPG’s full license requires the company to build its own mobile network from scratch — a costly undertaking by any measure. Earlier reports have it that TPG has yet to offer coverage as comprehensive as the incumbents. According to the company, it has increased its capex in Singapore around 73% y-o-y to A$69 million ($60.33 million) from 1H2019 to 1H2020. This has brought its cumulative capex spent in Singapore to $183.6 A$211 million, which is still below its guidance of $200-300 million.
DBS analyst Sachin Mittal believes that low prices alone will be insufficient to draw customers if network performance is patchy. “A telco needs strong and widespread 4G infrastructure to offer robust and reliable 4G services. There are many telcos out there providing more reliable service at still affordable prices,” he says.
To stay lean and efficient, TPG is partnering with online channels for new sign-ups.
Its brick-and-mortar distribution network is weaker in comparison. This means TPG may not be as efficient reaching out to one of the key target markets of foreign workers who are not very digital-savvy, says Mittal.
Mittal acknowledges TPG’s bid to win over users who want another SIM card for their second and third devices. However, the addressable market might be too small for TPG to make a reasonable profit. As for TPG’s existing base of around 400,000 trial subscribers, some of them are likely to “churn out” as TPG starts charging, which would then benefit other operators.
On its part, TPG maintains that its network has achieved full redundancy and has proven “extremely reliable” since its service trial launch in December 2018, says its chief technology officer Sudhir Tripathi.
“As a new mobile operator, we have the benefit of building our 4G network from the ground-up with advanced 3D Radio Planning tools to ensure excellent coverage,” he says.
“TPG has enabled all the advanced LTE features on our network for the benefit of customers, and we are likely the only operator in Singapore deploying upgradeable active radio systems extensively indoors for the highest performance.”
For the 1HFY2020, TPG reported revenue of A$1.1 million and operating losses of A$1.8 million for its Singapore operations. In the previous year, it had A$0.8 million in operating losses.
For TPG as a whole, its revenue for 1HFY2020 was A$1.25 billion, up slightly from A$1.24 billion in the year earlier period. Earnings, on the other hand, surged from A$46.9 million for 1HFY2019 — when it had to book an impairment of A$227.4 million — to A$143.6 million for 1HFY2020. Year to date, TPG shares — quoted on the Australian Stock Exchange — have increased by 6.79% year to date to close at A$7.23 on April 2, valuing the company at A$6.81 billion.
Telco stocks appeared unfazed by TPG’s announcement on March 31. Singtel was up 5% to close at $2.54 that day, while Starhub finished at $1.33 up 1.5%; Netlink NBN Trust, TPG’s 5G trial network partner, ended the day unchanged at $0.90.
