TELCOs – OCBC
Little impact from Telecom Code Revision
Revisions to Telecom Competition Code. The Infocomm Development Authority of Singapore (IDA) has made several revisions to the Telecom Competition Code (TCC) with effect from 21 Jan 2011. One of the key changes is a clause that prohibits telecom licensees from “cross-terminating” a consumer’s service agreement for a breach of another service agreement from an affiliated operator; this means that the telco cannot exert undue pressure on consumers to make payment of disputed charges by threatening to terminate other services (unless offered under the same service agreement). Another key addition is that telcos will no longer be allowed to charge consumers after a free trial service has ended unless they obtained express agreement from the consumer. Other changes to TCC aim to further promote competition, which include the ability for the IDA to apply a prohibition against abuse of dominant position to any licensees that it finds to have significant market power although the regulator has yet to classify them as Dominant Licensees.
More protection for consumers. Overall, these revisions are more to safeguard the country’s growing pool of mobile and broadband users. As of Oct 2010, IDA data shows that Singapore has around 7.2m mobile subscribers and boosts of a mobile penetration rate of 142.1%; the nation also has around 7.5m broadband users with a penetration rate of 183.5%. However, we believe that these revisions are unlikely to have a huge impact on the daily operations of the three telcos. For one, telcos have pointed out to the IDA during the two-year feedback process that they only terminate services as a last resort after they have exhausted all other measures to recover their monies. We think that the outlawing of the automatic “opt in” for services after the free trial has ended may result in some operational changes for the telcos; but we believe that offering a free trial is still one of the best ways for telcos to showcase their value-added services and gain new subscribers.
Maintain NEUTRAL. Separately, we note that SingTel has upped its game with its plan to start video game rental service using the new NBN network; as we articulated before, we think that telcos need value-added services to stand out from the crowd. But as it is still early days for the NBN market, given the still-low adoption rate, we do not believe that there will be a significant catalyst for SingTel and the other telcos in the near term. Maintain NEUTRAL.