Service more important than price in competition for customers: Telcos

SINGAPORE — When StarHub announced last month that it planned to start charging for its 4G add-on service, a curious fact came into focus: All three of Singapore’s telcos will introduce the exact same charge of S$10.70 for the value-added service if and when they stop offering it for free or at a discounted rate.

With the Infocomm Development Authority (IDA) confirming that there was no official guidance on how much telcos should charge, some consumers questioned why the three settled on the same price, while also asking if there was enough competition in the local telecommunications market.

The short answer, as suggested by the telcos, seemed to be: Yes, we do compete, just not on prices; compare our offerings instead. When invited by TODAY to explain how they had calculated the S$10.70 charge, StarHub would say only that “we price our services rationally and competitively”, while a SingTel spokesman said the S$10.70 rate was “significantly more affordable” compared with the excess charge for 3G pricing, which was S$2.76 per megabyte.

M1 did not address the issue, saying instead that it had invested S$1.6 billion and would continue to make significant investments to build a better network. “Our products and services are priced to enable us to continue making these investments to deliver a better experience to our customers in a sustainable manner,” said a spokesman.

This is not the first time the telcos have appeared to be moving closely together when it comes to pricing or service. Some offerings are placed at the same or very similar price points and, in 2012, all three companies decided to slash what was offered in their mobile data bundles.

The IDA, which oversees competition within the industry instead of the Competition Commission of Singapore, told TODAY that telcos may choose to price their services at or near the levels of their competitors, but are prohibited from colluding with one another. While the regulator recognises that similar pricing may be a feature of the local market, it is attempting to introduce more competition to benefit consumers. Last month, it opened up a public consultation to facilitate the entry of mobile virtual network operators in a bid to encourage lower prices and more innovative services.

COMPETITION HAS MOVED BEYOND PRICING

While the regulator wants to see more movement in price, all three telcos said this was no longer the most important way in which they attract and retain customers.

Mr Chan Kin Hung, senior vice-president of mobility at StarHub, suggested that competition had moved beyond pricing in Singapore’s small and mature mobile market. “Today, we differentiate ourselves by providing excellent customer service and customer value with product and service innovations,” he said.

Some examples include offering mobile plans with larger data bundles, a reliable mobile network and bundled service features such as high-definition voice calls and “hassle-free and affordable” roaming services.

Mr Chan also said StarHub has strived for innovation by tailoring unique mobile services for specific segments, such as heavy users, youth and seniors.

Instead of pricing, SingTel said it strives to differentiate itself through the quality, reliability, speed and innovativeness of its mobile services, as well as the customer experience offered. Its spokesman pointed out that the calculation of prices had to take into account a range of issues. “Other factors that may influence pricing include the cost structure of our networks and the investments we have made in them. We see a similar trend in pricing globally.”

M1 similarly pointed to investments in its network infrastructure and innovations in its service and processes. “Our products and services are priced to enable us to continue making these investments to deliver a better experience to our customers,” it said.

A PRICE WAR COULD HARM THE TELCOS

Analysts said that while consumers may reap the benefits of improved service offerings, there are fewer advantages when it comes to price because the telcos generally do not wish to compete aggressively as each has carved out a market share that they can live with. Ms Serene Chan, a senior industry analyst at Frost & Sullivan, said: “It is quite clear that no one wants to rock the boat. They wish to preserve the industry and no one wants to be wiped out due to competition.”

Mr Clement Teo, a senior analyst at Forrester Research, added: “The market has reached equilibrium in terms of competition. Prices have been driven to the point where there is a balance — telcos have market share, yet are able to make profit.”

But looking elsewhere, consumers may see the financial benefits of having a competitive market. In Hong Kong, there is greater price and brand differentiation among its four major telcos. One company, CSL, has three brands under its umbrella: 1O1O, a premium brand, one2free, which is mid-tier, and New World Mobility, which targets lower-income consumers. CSL has different retail strategies for each brand. The 1O1O retail stores are plush and upscale, while New World Mobility stores are located in the heartlands.

However, in Malaysia, consumers appear to be worse off, with telcos adopting a similar pricing structure compared to their Singapore counterparts, though there are four major players there.

Analysts said seeing how Singapore’s telco market matches up to those in other countries might not be a fair, as many external factors affect competition here and elsewhere. Ms Chan and Mr Teo pointed to a smaller subscriber base here compared with other markets in the region as a key issue.

Ms Chan added that as telecommunications is a capital-intensive industry, the telcos need to move carefully to ensure that they do not engage in strategies that see them win market share at the expense of profitability. “Telcos need to invest in infrastructure, as usage seems to be doubling every year. Hence, a price war will not be good for the industry,” she said.

Ms Chan also said the IDA had to tread a careful line between creating enough competition to benefit consumers and eroding the telcos’ ability to sustain services that are increasingly important for the development of the overall economy. “The IDA is looking at the ideal scenario. Mobile is the enabler of economic growth and it is becoming a utility such as water or electricity. But operators still need to make money and have enough money to upgrade their network. To do that, they need to ensure returns,” she said.

Against this backdrop, consumers wanting to see telcos competing more aggressively on price are likely to remain disappointed.