We just wrote an article talking about the defensiveness of telecoms as a service utility that people cannot live without. But I have talked much about telecom may not always be a fool proof cash generating business model [read here].
Here is another good telecom evangelist talking about it. Martin Geddes [profile here] have quite a profile talking about technology ecosystems especially on telecoms. U can follow future talk on the industry [here]
If you are big in telecom stocks, its good to read it as part of forming your own perspective.
Peak Telecoms >>
Here are my thoughts on how likely this will impact the Singapore Telecoms
- You are starting to see it. The ARPU is not jumping. There isn’t much drivers for the 3 telecoms. They are fighting for each other’s customers. At most they are upselling mobile data plans. Will this change with LTE? More deployment cost, but still little switching cost.
- Local content is non existent. The telecoms have a problem because in this part of the world piracy is rampant. Content piracy that is. You have China set top box and bit torrent of your favorite shows. But another problem is that, unlike other countries where there are local language content, there isn’t much for Singapore! People still like their Hong Kong shows, American shows and English Premier League more.
- The telecoms are not competing well on the cloud computing, value added service front as well. The people would prefer their Hotmail. Gmail and Yahoo Mail. To get cloud storage they would rather go Dropbox or Box. Why get it from Singtel if its more expensive but yet do not offer more upside? Perhaps its faster? Much of the Content have been delegated to Apple, Google and these Web 2.0 companies to provide.
- So if they have no value add and what we hold dear (contact list, number) is portable then what is Singtel, M1 and Starhub to us? A data pipe essentially.That is a commodity in itself. What is this pipe made up of? Cell towers and a intricate network of fibers and computers.
- With the setup of NBN Fibre Broadband it becomes an open market for competitors to setup their own broadband offering. Think there are no competitors? Perhaps you can check out ViewQuest, MyRepublic. On Hardwarezone you are starting to see adoption.
- We talked abit about FemToCell as an alternative to your Singtel, M1 and Starhub cell station via a well established fibre network. The missing ingredient now is a better WIFI offering. Next Gen WIFI could be the case. It lets your phone to easily switch between 3G/LTE and WIFI on its own upon detection. This is a boon for bandwidth intensive areas for Singtel, M1 and Starhub but more than all, with Fibre, Good Wifi Technology, cheap telecom equipment from Huawei, you can really make a play at the incumbents.
- These startups like ViewQuest and MyRepublic probably will not kill Singtel, M1 and Starhub, but will make them sit up to take notice that people can come in and compete cheaply. Margins will be eroded.
- Remember that this region is famous for piracy and China products? There are many China set top box on offer playing PPTV, PPStream providing free chinese content and probably English ones. What happens when they come with FemToCell? It allows smart startup to develop a crowd sharing ISP.
- The people are cheapskate and probably looking for viable cheap alternatives and if startups do it well, sooner or later people are going to realize there are alternatives and I do not have to stick with Singtel, M1 and Starhub who does not listen well to my needs.
- As Investors, it will be easy to see.
- Monitor the quarterly report of all three telecoms. If their local ARPU and Net Adds are all falling, you know they are feeling the heat.
- If you are in it for the dividends, when free cash flow is consistently less than dividend payout, that is a red flag.
- On the ground you will hear of it. Relatives and friends will tell you this hot new start-up or entry that delivers a cheaper mobile strategy.
For now, the telecoms still are doing well. Lets see what happens in the next 2 years.
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