Experts say StarHub retrenchments a sign of hard times ahead for telcos

On October 3, Wednesday, StarHub announced that it would lay off 300 workers because of restructuring plans costing the company S$25 million. Experts are now saying that this may be a sign of rough times ahead for the telecommunications industry.

Industry analysts say that competition in the market will only escalate, what with the launching of a fourth telco, TPG Telcom, by the end of 2018, as well as the rise of mobile virtual network operators (MVNOs) My Republic, Circles.Life and others.

Sachin Mittal, an equity analyst for DBS, said that in the next two to three years, the telco industry might possibly be heading for consolidation. He also says it’s likely that the mobile industry will decrease by 4 percent each year until 2022, due to intensifying price wars upon the launch of TPG Telcom, as well as the increase in service plans that offer only SIM cards.

Mr. Mittal is also predicting that TPG Telcom may not last more than three years in Singapore, specifically because of the emergence of MVNOs.

Alvin Chia, a PhillipCapital research analyst said, “Australia itself can’t support four telcos, because TPG and Vodafone merged… Singapore is already so competitive. This will be very hard for TPG to enter,” referring, to already exiting market saturation in Singapore, with has 5 million people, as opposed to 26 million in Australia.

Singapore’s telcos are already showing decreasing profit, since voice calls have lessened in price and roaming usage been on the decrease, with consumers opting for calls made over data as well as SIM-only plans.

Singtel, StarHub and M1—Singapore’s telcos—have aggressively marketed their unlimited data and SIM-only plans, which are less profitable in the long run for the firms.

Recently, Singapore Press Holdings (SPH) and Keppel Corporation announced their intent to buy out M1’s shares.

Mr. Chia said that M1’s workers could possibly face retrenchment, since all telcos are endeavoring to cut costs to remain competitive.

SPH and Keppel said that the share buyout was done in order to drive business changes in M1 that will enable M1 to compete more effectively in the telecommunications industry,” and that the new MVNOs would only escalate competition and put shareholder value at risk if things stay the way they are.