Will TPG's commercial launch be a hit?

Its subscribers might churn once the plan is no longer free.

TPG’s commercial launch is expected to appeal to a more niche market of people who are looking to stream videos in malls and outdoor places, according to a report from DBS Group Research.

TPG launched its commercial services on 31 March, unveiling a SIM-only plan at $10 monthly for 50GB of data. The plan comes with 300 local call minutes, 30 local SMS and from May, free 1GB roaming to selected countries.

The telco’s subscribers of 400,000 are expected to leave once the plan is not free anymore, as they might not want to pay $120 annually for a service which they have been using for free.

Even on the possibility of TPG still maintaining all its subscribers, DBS estimates that this will just translate into an annual revenue of $48m, far below the breakeven revenue of $150m and cumulative capex of $184.07m (A$211m) it has incurred so far.

The report also found that TPG’s services are more suitable for video-streaming services in areas of its 4G coverage. “As we understand, TPG’s voice-call experience is also sub-optimal due to the lack of a 3G network to plug the gaps in its newly-built 4G network,” DBS Sachin Mittal said.

The telco also said the plan is targeted at consumers such as parents buying a first SIM card for their children, users with a second or third smartphone device, and foreign workers.

However, DBS does not expect the service to appeal much to them, as there are other cheaper plans considered to have better coverage like that of MyRepublic available at $10 per month. There are also other existing telcos that offer cheaper family bundle plans.

Meanwhile, many foreign workers are not digitally savvy, and would need guidance from local distribution agents in making the purchase. “Building a local distribution network on the ground takes a lot of time and cost, which we think will be a challenge for TPG,” the report noted.