Telco market's margins to narrow as more MVNOs launch in 2020

TPG is also tipped to launch its commercial mobile service in Q1.

The high competition in the mobile market is expected to persist and continue to weigh on the industry’s revenue going into 2020 as more mobile virtual network operators (MVNOs) enter the market, according to a report by CGS-CIMB.

Although some MVNOs are expected to exit the market in the next 12-24 months due to the difficulty to achieve profitability, several new are poised to enter in H1 2020. As of YTD 2019, five new MVNOs have entered the market, which brings the total figure to nine.

In addition, TPG is projected to launch its commercial mobile service in Q1 2020. Although it is not expected to further shake up an already intense competition in the market, its entry may keep competitive pressure high.

Given TPG’s relative inexperience compared to incumbent MNOs and the MNVOs that ride on their networks, TPG is expected to commercially launch with a discounted offer. CGS-CIMB believes that it will target senior citizens by launch.

Apart from the entry of MVNOs, the market has been characterised by the launches of sub-brands like Singtel’s Gomo and StarHub’s Giga, as well as plan revamps like StarHub’s #hellochange and M1’s One plan that simplified and enhanced the attractiveness of their offers.

The more generous data quotas on offer were also found to have caused some subscribers to downgrade to lower-revenue plans. The continued shift from device bundled contracts to SIM-only plans is also expected to drag down revenue.

“Excess data usage revenues will ease as existing [subscribers] continue to transition to more generous new data plans upon their 24-month contract renewals. However, we believe, the incumbents’ recent subsidy cuts on device-bundled plans may help to cushion the downward pressure on service revenue,” Analyst Foong Choong Chen said.

Revenue of the mobile market is projected to slip 7.6% in 2019 and further fall 6.9% in 2020.