Challenges S'pore telcos will face

SINGAPORE : How to retain customer loyalty? – This will be the main challenge for Singapore’s three telcos next year and beyond, according to analysts.
With pay TV, tablets and smart phones such as iPhones ensnaring consumers with their proprietary applications, telcos around the world are losing their grip on customers’ wallets.
At the end of November, OCBC Research downgraded Singapore’s telco stocks to “neutral” from “overweight”, despite StarHub and M1 outperforming the Straits Times Index handsomely this year.
StarHub shares have climbed 23 per cent so far this year, while those of M1 have gained 25 per cent. SingTel, meanwhile, has been the laggard of the pack, with its shares falling 0.6 per cent this year.
So just what are the Singapore telcos doing to stay ahead of each other and powerful device makers such as Apple?
Well, recently, M1 threw its hat into the pay-TV arena. It also plans to strengthen its position as a full service operator and to attract more corporate customers.
Meanwhile, SingTel said it will be focusing on localised applications-based services to keep customers hooked.
Allen Lew, Singapore CEO, SingTel, said: “With the emergence of high speed network with more and more functional intelligent devices, the opportunities for us to grow is based on our ability to innovate and use our customer insight to develop applications that are relevant and that make it easier for our consumer customer to do things as they are out and about, but also make our business customer more productive, bringing them closer to their own set of customers.
“I think at the end of the day … applications and content are the next lap of growth for us, and for us to do that, we really need to be able to innovate and we really need to do that in an organised way.”
SingTel, which has already entered the pay-TV business with mioTV, said it sees its future as a multimedia solutions provider.
Mr Lew said: “Just galvanising the entire company, all 13,000 of us in the Singapore business of SingTel – to understand that going ahead, the growth opportunity really starts to shift from being a telco to being a multimedia company.
“So that requires a mind shift change, and a culture change – for us that’s a big challenge. It’s a work in progress and we are going through that in 2010, and we will continue to go through that more aggressively than ever.”
Analysts are sceptical if Singapore telcos can create a content-centered business so powerful as to wean customers off the magic spell cast by Steve Jobs.
Jayesh Easwaramony, director of ICT Practices, Frost and Sullivan, said: “So if today a consumer is buying an iPhone, he already has access to a lot of global applications and it makes it very difficult for Singapore telcos to compete with the global scale of device manufacturers and internet players.
StarHub expects that by the end of next year, 75 per cent of its postpaid subscribers will be using smart phones, up from an estimated 50 per cent now. For the telco, it could mean a higher cost of handphone subsidy.
Neil Montefiore, CEO, StarHub, said: “The NGNBN has been a challenge as well. I think the biggest challenge though, especially in terms of our accounts and performance, has been the smart phone revolution here in Singapore.
“It started in December 2009 and started for about three weeks before the end of the year. The number of phones sold doubled and it stayed at that level ever since. Three quarters of the phones sold are smart phones, half of them are iPhones, so the android phones are growing quite rapidly now.”
He said the expected increase in smart phone usage next year should deliver a benefit, “but the challenge came in the additional subsidies that these phones require”.
Going forward, StarHub is looking to drive business growth through Singapore’s new high-speed Next Generation Nationwide Broadband Network (NGNBN).
It is hoping to gain a 30 per cent broadband market share in the 20,000 new buildings that it will have access to as a result of the network.
Analysts said looking into next year’s growth for the three telcos will come from data revenues.
Frost and Sullivan’s Jayesh Easwaramony said: “The growth will definitely come from data revenue. But I think why telcos are investing in applications is to try and control the consumer experience, because today the consumer is not buying the service provider brand – he is buying the device… an iPhone or a Blackberry, and SingTel servers are secondary to them.
“What telcos want to do is make sure that the consumers don’t get taken over by the device players. I think the more you can manage the consumer experience, the more stickiness you can create and the better you can manage the experience. I think the market in Singapore is not so much the acquisition of subscribers, but the retention of subscribers.”
Article via Channel News Asia