Cut-throat telco war heats up as SMRT jumps into the melee

OMGtel has a huge edge over MyRepublic.

The battle between Singapore’s three incumbent telcos and their aggressive challengers have become a notch more intense.

This is on back of transport operator SMRT’s unforeseen decision to back fourth telco hopeful Consistel by establishing a joint venture called OMGtel.

According to DBS, SMRT’s move beefs up the case of a potential new entrant and provides OMG a huge edge over MyRepublic, another aggressive contender.

About 60 MHz of 900 MHz spectrum held by existing telcos is expiring in March 2017, and this spectrum is likely to be up for sale this year.

“OMGtel (OMG) could have a big edge over MyRepublic due to a strong partner like SMRT, in our view. SMRT and Consistel's joint venture OMGtel could benefit in two ways: (i) provide edge in speedy rollout of 4G network in Singapore using SMRT’s real estate, and (ii) drastically reduce the marketing costs required to acquire new customers as SMRT stations can serve as retail touch points,” stated DBS.

DBS noted that the joint venture could substantially push down Consistel's capex investment, which had initially been pegged at a whopping $1b.

"The three existing telcos have built a shared network infrastructure with SMRT to deploy 4G services in the MRT lines. OMG might be able to use the existing network for a fee without incurring the capex, but we do not have details of the agreement between SMRT and telcos. Most importantly, 900 MHz spectrum band is also more capex efficient than 1800 MHz and 2.6GHz bands deployed by existing telcos for 4G. So actual capex for OMG could be much lower than our S$1bn assumption," stated DBS.

DBS warned that in the case of a 4th telco entry, M1 could be most impacted due to its more price-sensitive customer base.

“We think almost 35-40% of OMG’s revenue could come from customers switching out of M1. The remaining 60-65% of OMG’s revenue could come from customers switching out of SingTel and StarHub," noted DBS.