RAM Ratings: Singapore telcos can take on more competition

RAM Ratings sees incumbent Singaporean telecommunication companies (telcos) holding their ground despite the potential of new players heating up competition. 

“Our analysis reveals that SingTel, StarHub and M1 have healthy cash-generating ability to drive data growth which dictates the future landscape,” said Davinder Kaur Gill, Co-Head of Infrastructure & Utilities Ratings, RAM Ratings. “This positions the incumbents well against incoming competitors that would need to rapidly sink in hefty capex to gain significant traction.”

RAM expects spectrum-acquisition costs and advertising expenses to increase as more players enter the market. The intensifying competition in the telecommunications industry is moderated by Singapore’s high income per capita as consumers have strong purchasing power and quick adoption of the latest products and technology. The Singaporean telecommunications sector has been charting healthy growth, with a five-year (2010 to 2014) CAGR of 4.1% for industry revenues. The large spending power is also partly reflected in the higher postpaid-to-prepaid mix of the Singaporean market – atypical of the region where prepaid schemes generally take precedence*. Nonetheless, the industry is constrained by the nation’s small and ageing population**, the consultancy said.

RAM Ratings also commented that Singapore's size eases the deployment of infrastructure and that its success has been helped by the well-executed efforts of its government in creating a market-driven and open economy. "The liberal regulatory landscape – as evinced by the auction of spectrum rights and the enforcement of competition law by the regulators, such as the cross-carriage rule for the pay-TV segment – facilitates competition based on efficiency and enables telcos to provide high-quality services at competitive prices, ultimately benefiting end-users," the company added in a statement.

RAM’s report, Singaporean Telecommunications Sector – Liberalisation, additionally notes that the industry has experienced slower mobile revenue growth and outlines the downtrends in average revenue per user in the fixed-broadband segment.  

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*Asia Pacific Mobile Observatory, GSM Association.
**Singapore Department of Statistics.