MNP goes live on 13 Jun

IDA announced yesterday that mobile number portability (MNP) will go live in Singapore on 13 Jun 08. MNP will allow mobile-phone customers to switch providers while maintaining their numbers.

This comes almost 20 months after IDA first announced its decision to roll out MNP in Singapore, in Aug 06. The June rollout date is within IDA’s latest guidance on 1 Jun 07. The date was previously scheduled for 4Q07 but was pushed back by delays in appointing the centralised database administrator.


Not expecting significant market-share shifts or spike in churns. We believe that all three mobile players had taken measures to retain their respective customers throughout 2007. This is evidenced by higher subscriber-acquisition costs (0-35% yoy) and relatively low churn rates of around 1% in 2007. Tactics included attracting valuable subscribers with generous handset subsidies for contract renewals, better IDD deals as well as bundled discounts (especially in the case of StarHub and SingTel) with other services such as broadband and pay TV. More recently, we noticed greater attempts at differentiating mobile package services with offers such as flat-rate plans, free bundled minutes/SMS and sharing minutes/SMS with family members.

Competition should remain relatively rational, with an eye on profitability and free cash flows. Competition is unlikely to break into an all-out price war but rather, on improving value propositions with greater differentiation in mobile-service plans, e.g. sharing minutes/SMS with family members, per second billing. Our view finds support in a Bloomberg article dated 16 Apr 08, which highlighted comments from Mr Quek Peck Leng (EVP of SingTel’s consumer division) that SingTel does not plan to engage in a “destructive price war” to keep its customers with the advent of MNP.

Not much downside for margins as a result of MNP. The big shift in cost structure had taken place last year when all three operators took proactive action to retain their customer base ahead of MNP. Costs will be structurally higher now but we do not expect significant downside on top of the margin adjustments observed in 2007. EBITDA margins slid 300-780bp yoy for the three players with M1 being the hardest hit, reflecting the competitive disadvantage of not providing bundled offerings with broadband and pay TV.

StarHub most likely to benefit, M1 most vulnerable in the longer term. StarHub has the smallest base of postpaid subscribers in Singapore with a market share of 27% vs. M1’s 44.6% and SingTel’s 28.4%. StarHub clearly has more to gain than lose from MNP in the longer run. We believe that M1 is the most vulnerable to losing out in the longer term due to its inability to provide bundled offerings (broadband and pay TV) which we believe are becoming more important to the buyers of telco services in Singapore.

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