Saturday, June 16, 2012

Singapore telcos: New data price plans will help operators monetise high-speed mobile networks

Consumers are in an uproar over Singapore Telecommunications’ decision to end its buffet-style mobile data plans. On June 4, SingTel, the country’s largest telco, announced a significant change to the way it charges customers for mobile data. From July 1, new customers and those renewing their contracts will see the data bundles on their mobile service plans reduced to between 2GB and 4GB, from 12GB previously. Only those paying $205 a month will continue to enjoy a 12GB data bundle.

Many are complaining that their phone bills are already too high. Some have threatened to decamp to other operators, or give up paying for data entirely. In fact, it is more likely that consumers will eventually realise the new price plans don’t leave them worse off. Some may actually benefit. And as they adapt to the new prices, investors should win too as the telcos see better long-term economics.

PAY FOR WHAT YOU USE
Yuen Kuan Moon, who heads SingTel’s local consumer business, says only 10% of Sing- Tel’s customers will exceed their new data bundles. That means, of the customers who are currently paying $39.90 a month for Sing- Tel’s Flexi Lite plan, which bundles 100 minutes of outgoing calls, 550 text messages and 12GB of data, only 10% will exceed the new 2GB data allocation. The same goes for customers on the $59.90 Flexi Value plan or the $99.90 Flexi Plus plan, who will now get 3GB and 4GB, respectively (see table).

Yuen also says that 10% of customers will pay less than they used to because of an increase in the amount of local SMS bundled with the revamped plans. Many question Sing- Tel’s wisdom in doing this, given the deteriorating use of SMS in favour of messaging applications such as WhatsApp and Viber. But Yuen rightly points out that SMS remains the most universal form of text messaging because not everyone uses messaging apps. He says over 10% of SingTel’s customer base still regularly exceeds the local SMS allocation.

For the 10% who will exceed their data bundles, they have the option of upgrading their plan, or paying for data on a per-use basis. SingTel has generously lowered the price of data. Previously, users who exceeded their bundle were charged $2.76 per MB. Now, they will pay $5.35 per GB. This rate, Yuen says, is 500 times cheaper than before. Some customers have complained that they now need to pay $205 if they want 12GB of data. This is an erroneous calculation. If you are on a $39.90 plan and use 12GB in a month, you will only pay $53.50 for the additional 10GB. That works out to $93.40. Also, regardless of your excess data usage, SingTel will not charge more than $88 for additional data outside of the bundle.

A glance at prices of mobile data around the world also shows that Sing- Tel’s prices are competitive. In the US, AT&T charges US$30 ($38) a month for 3GB of data, with no voice minutes or text messages. The 3GB plan also cannot be shared with another device, which SingTel allows here. In Hong Kong, SmarTone Telecommunications Holdings charges HK$248 ($40) for 500MB, with subsequent 200MB blocks priced at HK$40. And in Malaysia, Maxis charges RM75 ($30) for 3.5GB of data, without voice or text.

Given the circumstances, consumers should eventually come round to the idea that, in the same way call minutes and text messages follow a tiered pricing model, data should too. In any case, that is the direction the industry is taking. In an email response, Cassie Fong, StarHub’s senior manager of corporate communications, says: “In this era of data explosion, it is necessary for mobile operators to rationalise and bundle their data products right to better manage finite network resources so as to ensure network quality for customers.” She says StarHub will discontinue its own 12GB bundles in the “near future” and will offer plans with data bundles of 1GB to 5GB instead, adding that the company is “pleased that the industry is moving in this direction”. M1 says it has no further details to share at this time but analysts believe it too will make a similar move.

In a report, Credit Suisse analyst Chate Benchavitvilai says Hong Kong operator SmarTone tried and failed to abolish its unlimited data plans earlier this year after peers did not follow suit. But given the likelihood of other operators following in SingTel’s footsteps, Benchavitvilai thinks the new changes are sustainable and should be a positive for all three companies.

DOLLARS AND CENTS
What does the new tiered pricing mean for the top and bottom lines of the telcos, and for their stock prices? Not much in the near term. Yuen says because only 10% of Sing- Tel’s customers will have to pay more, and 10% will actually pay less, overall average revenues per user (ARPUs) will likely stay flat. Also, he says that SingTel will continue to invest significantly to build its mobile network. UOB Kay Hian analyst Jonathan Koh estimates a 1.3% increase in ARPU to $83.04 a month. “The impact on overall earnings forecast is, thus, negligible,” Koh says.

Mainly, Yuen hopes the new plans will lead to a change in customer behaviour. “If a power company sold electricity at $99 for as much as you can use, some people with very big houses would leave their air-conditioners on all day or maybe keep their swimming pools heated at all times.” In this analogy, most people would end up paying for more electricity than they used, while a few would pay much less but end up heavily loading the power grid.

Similarly, he says, the present pricing model has resulted in the wrong sort of user behaviour. About 10% of SingTel’s customers currently make up 64% of total mobile data traffic. “No matter how much network capacity we added — and we have spent billions in the last few years on the network — we have not been able to keep up with this behavioural change. By doing this, we’re going to make sure that the data network grows in a sustainable manner and we can continue to ensure customers consistent speeds and a good experience.”

Luis Hilado, senior telecoms analyst for HSBC Global Research in Southeast Asia, says a heavy user will now have to “curtail his usage, increase his monthly ARPU or opt to keep his current plan and therefore, not claim a handset subsidy”. The goal, he adds, is to “enhance free cash flow through revenue improvement, cost control and/or better capex management”.

CIMB Research analyst Kelvin Goh adds: “This is a step in the right direction but earnings impact is minimal. We take a positive view of SingTel’s lower data bundle.” Goh does, however, note an important point. With the new tiered pricing, SingTel should be better able to monetise its new and faster 4G network over the longer term.

HIGHER SPEEDS, MORE DATA

On the same day it announced its new price plans, SingTel launched its 4G service for smartphones. For the same price, customers will be able to sign up for 4G mobile plans that offer actual data download speeds of between 3.4Mbps and 12Mbps. That compares with present speeds of 0.8Mbps to 4.8Mbps.

“ARPUs for these [4G] users should be higher than for 3G plans,” says CIMB Research’s Goh. Although 4G and 3G customers will pay the same price for their plans at the moment, from Jan 1, 2013 data usage in excess of the bundle will be charged at $10.70 per GB. “Also, as usage rises over time, more users will be compelled to upgrade their plan.” With faster speeds and faster devices, consumers are likely to do more on the go and use more data. Today, SingTel’s Yuen says mobile data traffic is growing at a rate of 7% m-o-m and projected to grow at a rate of 62% y-o-y even without taking into account the launch of 4G services. With a faster network, that number will rise, he adds.

Lennard Hoornik, president of HTC South Asia Pacific, says HTC’s launches of 4G-enabled handsets in other markets have been eagerly received by consumers. “When people buy, they want to buy something that’s futureproof,” he says. “In the US and Australia, LTE has really changed the handset market.” Now that customers are used to surfing the Internet on their mobile devices, he sees more of them clamouring for higher speeds — which means adoption of 4G devices will likely progress faster than the adoption of 2.5G and 3G devices. StarHub has said it is currently building its 4G network to cover key business areas later this year while M1 says it will have island-wide coverage by year-end.

With the change in price plans, SingTel and StarHub should be able to monetise this growth of mobile data consumption in a way they couldn’t at the launch of the 2.5G and 3G networks. Ramakrishna Maruvada, an analyst at Daiwa Capital Markets, says: “At the moment, the problem we have with the whole explosion of data is that the revenues don’t really scale with volumes. Network costs are a function of how much data is used, but revenues are not [tied to data usage]. By having a pricing plan that’s more closely tied to volume of usage, it gives the operators a more efficient return on capital.”

Yet, Maruvada says this is also a natural evolution of technology. Although SingTel might have been more profitable if it had instituted such tiered pricing in the beginning, the all-you-can-eat style data plans were useful at the point of introduction to encourage usage. “When you have an empty road, you don’t raise the tolls.” Now that the network is more fully utilised, however, Maruvada says it is necessary for the operators to begin changing their pricing models.

Better speeds could also help SingTel to sell new services. For instance, customers on all of SingTel’s Flexi plans receive 500MB of free storage on the company’s cloud service called Store and Share. Because the service is optimised for SingTel’s networks and the data centre is located here, access to Store and Share is significantly faster than access to Dropbox, one of the leading cloud storage services.

Ultimately, however, the launch of 4G services and tiered pricing for data plans won’t necessarily lead to better dividends or profits for the telcos. However, it does make their long-term outlooks more sustainable. That’s good for investors who are seeking exposure to these stocks because telcos are typically dividend plays that are held for the long run.

At the moment, shares of SingTel, StarHub and M1 have dividend yields of 5.1%, 6.2% and 6%, respectively. Share prices have held up well this year, given a general flight to safety. If the financial outlook worsens and they do dip slightly, investors will have the opportunity to pick up some bargains with the assurance that the telcos have done something to secure their future in the years to come.


Source/Extract/Excerpts/来源/转贴/摘录: www.theedgesingapore.com
Publish date: 11/06/12

No comments:

Post a Comment

Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
吉姆·罗杰斯(Jim Rogers)
“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
曾淵滄-散户明灯
每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
  • Selected Indexes 52 week range

  • Margin of Safety

    Investment Clock

    World's First Interactive Investment Clock