Question

Extract 1

The fourth step forward for telecoms Singapore introduced competition in its telecoms industry several years ago by breaking the monopoly of Singtel. M1’s entry in 1997 and StarHub’s in 2000 were meant to provide consumers with more choices and lead to higher levels of service at more competitive prices. Last week, the government announced the award of a fourth licence to Australian operator TPG Telecom. The outcome of these liberalisation moves should be good. The three existing telecoms companies have to up their game or lose their customers, who can switch easily from one telco to the next. Since the domestic market is now shared among multiple players, they also are forced to venture outside Singapore for new business. Singtel, in particular, has done this successfully, with its overseas businesses generating more than half its revenue and profit. This international exposure is good for Singapore companies because it strengthens their capabilities and finances. The entry of a fourth player should sharpen the competition further. That it is from outside Singapore should help to bring fresh ideas into this country and raise telecommunications standards in one of the most globalised nations on earth. While service levels are better now than they were before, there is room for improvement. Earlier this month, Singtel was hit by a widespread broadband outage, slightly over a month after a similarly disruptive StarHub breakdown. These incidents, which inconvenienced customers, show how important it is to maintain high standards of reliability. Telecoms services, which include broadband and mobile services, are part of a country’s critical infrastructure and are vital to its smooth and efficient running. This is more so for a place like Singapore, which is a financial centre and an aviation and shipping hub. There is no room for complacency. But the real issue is not domestic competition among local players. The digital revolution has meant that they have to compete now, not only among themselves, but against entities such as WhatsApp, Apple, WeChat and numerous other digital platforms that allow users to communicate, interact and share content with one another. These global giants have upended the industry. They are a boon to consumers but a nightmare to those whose businesses they have disrupted. If local telcos are not strong enough to adapt and meet the needs of their customers, who have many more choices now, they will suffer the consequences. Source: Adapted from The Straits Times, 20 December 2016.

Extract 2

Singapore’s big telcos face rude awakening, as the little guys get the last laugh Back in 2016, the three major Singapore telcos – Singtel, StarHub and M1 – held various meetings with investors and shareholders, reassuring them that a fourth telco would not be a threat to their businesses. The incumbents had felt that if a new competitor appears, it will be an uphill climb to deliver the same quality of services as them. The telcos believed they did not need to do anything. Whatever price the fourth telco offers, they will undercut it to kill off the competition.

But the telecommunications landscape today is far from the oasis of stability that the three telcos had portrayed to investors back then. There are now 11 telcos in Singapore, including the mobile virtual network operators (MVNOs) that have since flooded the scene. Right now, Singapore consumers are enjoying a variety of telco offerings at low prices like never before. Total mobile service revenue shrank 5.3 per cent in 2018. Industry leader Singtel’s group earnings fell by 7 per cent in the 2018 financial year compared with the previous year, while StarHub’s service earnings fell by 11.1 per cent and M1’s shrank by 3.7 per cent. For one thing, Singaporeans are now less willing to pay for data as before. People are no longer willing to pay high fees for premium plans that boasted more data. Today, nearly every telco offers affordable unlimited data plans. Consumers expect to get more data and pay less, which translates to more data consumption and less data revenue for the telcos. The popularity of off-contract plans also shows a change in handset replacement patterns among a segment of consumers, who are increasingly unwilling to be locked in. SIM-only plans have gradually reduced the dominance of the two-year post-paid contract model in Singapore, whereby expensive phones are subsidised by the telcos. Part of this is due to Chinese phone manufacturers such as Huawei and Oppo, whose phones boast lower prices than that of Apple and Samsung while offering similar performance. The influx of cheaper phones reduces the attractiveness of subsidised plans, and hence lowers the ability of telcos to lock customers into two-year plans. Source: Adapted from Channel News Asia, 8 July 2019.

(a) Using demand-supply analysis, analyse the view that a growing number of competitors in the telecommunications industry offers ‘a boon to consumers but a nightmare to those whose businesses they have disrupted’ (Extract 1). [10 marks]

(b) With reference to Extract 1, identify and explain four possible ways in which Singtel can exclude competitors.

(c) Explain the cost advantages which large telcos enjoy and consider the reasons for which ‘the little guys may get the last laugh’ (Extract 2).

(d) Using the theory of perfect competition, explain and illustrate how the entry of the mobile virtual network operators allows Singapore consumers to enjoy ‘a variety of telco offerings at low prices like never before’ (Extract 2).

Answer 1

a) Just as we read in the extract 1 it is clear that competition might be good for the customers but it is not good for the businesses. Expecially those businesses which are small and are not ready for sudden change.

1. Competition decreases your market share and shrinks your customer base, especially if demand for your products or services is limited from the start.

2.A competitive market can also force you to lower your prices to stay competitive, decreasing your return on each item you produce and sell. When too many businesses produce the same products, the market becomes flooded. As goods are overproduced, inventory piles up. When inventory reaches unsustainable levels, your company could have too much capital tied up in items that are just sitting on the shelf and not enough cash on hand for urgent expenses. Thus, if your output is more than the demand then you may suffer unpredictable losses.

3.You have to upgrade yourself otherwise you are out of the market. With constant new competition I'm the market, either you update yourself to their level or country yourself out of the market. Customers want options and if you can not provide them with the things they want, then you are nothing.

4. Increase in current cost. As the demand is suddenly changed because of the new competition, the existing business has to upgrade themselves. For international extra cost is needed.

5. Many options are available. We know nowadays many options are available for each and everything. Especially for Telecom sector, now not only different companies are their, now doe communication their are enormous ways such as whatsapp, Viber, facebook, etc. which new generation knows how to use well.

6. Demand is less than usual. Now with new competitors , the demand gets distributed. Earlier if you were getting 30% of the demand now after new competitors, you will get even less demand proportion.

b) Singltel can improve it's position by-

1. Investing in Ventura outside Singapore - If the competition has increased in domestic area, so in order to be in the game, you can invest outside your domestic area, just like Singltel did.

2. Include fresh knowledge - By using youth of the country and generating new ideas, they can understand the mind of the customers and this can work accordingly to increase their market value and to be in the game.

3. Maintain reliability - The first and fire basic features to main you customers is to make them fell that they can rely on you. If they will feel connected and reliable forwards you then they won't go our looking for options.

4. Continuous upgradation- In order to stand in the market you have to constantly upgrade yourself accordimf to the market and change and adapt for staying in the run.

c) Telecom operators that have been quick to digitalise manage to save costs and improve performance in key functional areas.

most digital leaders have three things in common according to the researchers. They have been willing to substantially simplify their portfolios, platforms and processes; they have been selective and moved high-impact parts of their operations online; and they have used a variety of automated and digital tools to improve productivity, problem-solving and customer targeting.

In the customer management space, leaders stand out for making the customer more autonomous. Self-care among customers is 200% higher among digital leaders than with their telecom sector peers, and have a 20% higher resolution rate in the first call for inbound customer calls as compared to other telecom companies.

Staying in the customer experience digitalisation space, digital leaders have moved their postpaid billing and credit management systems to automated subscription models. There is 50% more payment automation among customers of digital leaders than others.

Marketing and product management is another functional area where digital leaders manage a significant cost advantage, mainly by imposing 60% less tariffs than their peers.This allows them to “capture the flow-through effects of lower operating costs in marketing, sales, care and IT”. These companies also use nearly 20% more digital marketing techniques to better understand and target their customer base.

Now as in the beginning Singtel, StarHub and M1 did not worry about the forth player in the competition, now are facing eight more competitors in total. Thus it is very tightly said the little guys get the last laugh. Because no know thought anyone could stay in the market but thankfully ND pieces themselves.

d) After the entery of new competition total mobile service revenue shrank 5.3 per cent in 2018. Industry leader Singtel’s group earnings fell by 7 per cent in the 2018 financial year compared with the previous year, while StarHub’s service earnings fell by 11.1 per cent and M1’s shrank by 3.7 per cent. For one thing, Singaporeans are now less willing to pay for data as before. People are no longer willing to pay high fees for premium plans that boasted more data. Today, nearly every telco offers affordable unlimited data plans.

Consumers expect to get more data and pay less, which translates to more data consumption and less data revenue for the telcos.

This just like I'm perfect market, where prices of the computers are almost same and price doesn't affect the demand is the economy. Here due to increase in competition ,the old Telecom companies have now adjust themselves accordingly to be in the market and the only things that affect demand is their services and not their prices.