TELCO – CIMB

7-Eleven enters prepaid space

New MVNO player

7-Eleven has entered the prepaid market in Singapore by launching its mobile virtual network operator (MVNO) cards called 7-Connect, following similar successes in the US and Canada. The cards will be available in more than 400 7-Eleven stores in Singapore. Its partner is US-based MVNO Ztar Mobile and the service will ride on M1’s 3G network.

Who is Ztar Mobile? It is a mobile virtual network enabler (MVNE) offering wireless solutions that enables any party to provide private-brand wireless services to its own customers. It offers services to MVNOs such as billing and customer care, without any required investment in wireless infrastructure or expertise. It has partnered with leading wireless manufacturers and other handset manufacturers to deliver the first MVNE solution in the US.

What is on offer? 7-Connect offers users who sign up for S$30/month the following features :

• Free local voice calls on nights and weekends.
• Call tariffs of 15 cts/min for the first two minutes followed by 8 cts/min thereafter for all other hours.
• SMS rates at 5 cts/SMS for local SMS and 15 cts/SMS for global SMS.
• S$10 bonus for other features (SMS, IDD, etc)
• Fill-up cards for as low as S$18/month (free calls on nights and weekends not applicable here)
• Carry-forward minutes (minutes can be carried over to the next month) and free caller ID, voice mail, call waiting, conference waiting.

Comments

Not a significant threat.
We do not foresee 7-Connect posing a threat to any of the incumbents because:

• Its tariffs are the same, if not higher than those of the incumbents, except for the free calls at nights and weekends if the user tops up S$30 as its costs are controlled by M1. In addition, the minimum S$30/month spend required for users to enjoy free calls on nights and weekends is above the prepaid ARPUs (S$16-22) generated by the three major telcos, limiting upside and take-up of the service, we believe.
• It does not offer special IDD rates, hence, not addressing the large migrant worker
market in Singapore made up mostly of high-ARPU users.
• 7-Connect sells only 3G SIMs, which limits its users to 3G handset owners. This is
likely to exclude a significant portion of the price-sensitive prepaid market. The small 3G prepaid market is reflected in the fact that only M1 offers 3G prepaid services, while StarHub and SingTel do not. Having said that, we gather that 95% of the handsets sold in Singapore are now 3G phones.

Hence, carving out a foothold will be difficult in a mature market like Singapore, what with competition in the prepaid segment already very intense. Low-cost set-up. 7-Connect appears to be keeping its costs low by using 7-Eleven to distribute, unlike the now-defunct Virgin Mobile which opened up its own outlets. The 7-Eleven brand is well-known but not for its phone services. 7-Evelen sells reload coupons for all the existing telcos and it remains to be seen if it will be pushing 7-Connect harder.

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