Telcos, though, have less to worry about. Not only are they deep-pocketed, but their risk is also spread over several other business units. Singtel, for example, boasts enterprise, fixed broadband, and pay TV, while StarHub has enterprise and fixed broadband to draw on for revenue in these dire times.
MVNOs, on the other hand, have no such luxury. Mobile revenues are their primary source of income. Singapore’s biggest MVNO, Circles.Life, with 5% market share, was already performing a high-wire act before Covid-19 hit (we wrote about it here). Smaller players may be even worse off.
The turbulence in the sector may even ratchet up as Singapore prepares to roll out 5G networks. For telcos like new kid on the block, TPG, the lack of a 5G licence could see it beholden to legacy players for spectrum. MVNOs would similarly need to factor spectrum fees into their projections and calculations. For a telecom space bursting at the seams with competition, this could be a moment of reckoning.
Drop in ARPU
While Singtel and StarHub’s revenue dropped, the number of mobile subscribers increased quarter-on-quarter, even if at the same growth rate.
Singtel reported an increase of 31,000 subscribers quarter-on-quarter to 2.7 million.
StarHub reported a 1% quarter-on-quarter increase in postpaid subscribers to 1.5 million.
It’s not that mobile data usage has plummeted either. IDC’s Batra notes there hasn’t been a drastic impact on mobile data usage despite the fall in mobile revenue. Mobile hotspots are being utilised by accounts to connect work laptops, despite some offloading to WiFi, he said.
The problem, though, is that the real money-spinners—roaming charges and excess data usage—have taken a hit due to a drop in travel.
Singaporeans are known to be jet-setters. Its 5.6 million residents made over 10.7 million trips in 2019. The island republic’s lack of space and proximity to cheap travel locales in Southeast Asia are conducive to short weekend trips. Having Changi Airport—which has been ranked the best airport in the world for seven straight years—is a bonus.
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Frequent travel meant significant roaming charges, which served telcos well. Covid-19 has turned this on its head. Travel restrictions have curtailed both leisure and business trips. In May, Changi Airport shut down two of its terminals to bring down costs in the face of diminished demand for air travel.
The subsequent fall in average revenue per user (ARPU) has been precipitous, a fact borne out by the results of StarHub and Singtel. In the quarter ended March 2020, StarHub’s ARPU fell by S$6 (US$4.3) to S$34 (US$24.4) quarter-on-quarter, and by S$5 (US$3.6) year-on-year. Singtel, meanwhile, saw ARPU fall by S$5 (US$3.6) quarter-on-quarter and SS$8 (US$5.7) year-on-year to S$33 (US$23.7). Data services as a percentage of ARPU also saw a marginal quarter-on-quarter decline, though it remains higher than last year.
Having other business units, like an enterprise services segment, has helped cushion StarHub’s fall in mobile revenue. But its operations “saw significant impact from late February, with the full impact seen from April following the circuit breaker—this pressure is unlikely to abate in the near future,” said the research team at OCBC Investment Research in an 8 May report.