How many telcos are there in Singapore currently? If you answered 3, that is incorrect. There are currently 6 telcos -- 3 traditional telcos that operate their own telco networks, namely, Singtel, Starhub and M1, and 3 Mobile Virtual Network Operators (MVNOs) that buy network capacity from the traditional telcos and resell to retail customers. Ever since the first MVNO, Circles.Life, set up shop in May 2016, things have accelerated in the MVNO space. In a short span of 3 months, we have had another 2 MVNOs springing up, namely, Zero Mobile and Zero1. You probably have heard of their promotions, like Circles.Life's 20GB of data for $20, Zero Mobile's Unlimited calls, SMS and data plan, or Zero1's unlimited data plan for $29.99. Since MVNOs compete for the same group of retail customers as the traditional telcos, will MVNOs cannibalise telcos' business? Let us look at each one of them.

Circles.Life leases network capacity from M1. Its most well-known promotion is its 20GB-for-$20  plan. Although it sounds exciting, you need to sign up for the base plan first before you can sign up for the 20GB-for-$20 add-on. The table below compares Circles.Life's base and add-on plans and the corresponding M1's SIM-only plans. Note that I am using M1's SIM-only plans that come with 12-month contract, whereas MVNOs do not require any contracts. M1 has no-contract SIM-only plans, but these plans provide less data and I believe most customers would not mind signing up for a 12-month contract for better value.

As you can see, Circles.Life's base plan is more expensive than M1's corresponding plan. There are a few add-ons to make both plans more comparable. Circles.Life's plan does not come with free incoming calls. To have this feature, you need to add another $2, making it effectively $30 per month. M1's plan does not come with caller ID, which costs another $5.35. Hence, the equivalent cost is $25.35 per month. In terms of the base plans, Circles.Life is generally more expensive than M1, although Circles.Life has 1GB of data more.

It is only when you add on the 20GB-for-$20 option that Circles.Life becomes cheaper than M1's corresponding plan. After accounting for the necessary add-ons mentioned above, Circles.Life's plan costs $50 whereas M1's mySIM50 plan costs $55.35, but with 4GB of data more.

According to M1, the average data usage for Dec 2017 is 4.3GB per month. Thus, customers who need the 20GB-for-$20 add-on really belong to the minority. Circles.Life is unlikely to threaten M1's telco business.

Both Zero Mobile and Zero1 lease network capacity from Singtel. Zero Mobile has 2 plans while Zero1 has 1 plan. The table below compares the plans for Zero Mobile, Zero1 and Singtel's SIM-only plans (with 12-month contract). The corresponding Singtel's SIM-only plans are 10GB for Zero Mobile and 5GB for Zero1, for reasons discussed later.

Again, for the base plans, MVNO's plans are more expensive than Singtel's corresponding plans. To make Singtel's SIM-only plans more comparable to that of MVNOs, I added unlimited talktime for $16.05, 25GB of data for $26.75 and caller ID for $5.35, where applicable. Unlimited SMS for $16.05 is ignored, since most subscribers nowadays do not send many SMS.

After accounting for all the corresponding add-ons, Singtel's plans are more expensive than all the MVNO's plans. There are important caveats, however. Firstly, "unlimited" does not really mean unlimited usage. For both Zero Mobile and Zero1, "unlimited" means a cap of 5,000 mins of talktime and 5,000 SMS per month. Secondly, Zero X's unlimited data plan does not allow you to share the data with other devices, either by using your phone as a WiFi hotspot, or using the SIM on another device. For Zero1's unlimited data plan, only the first 3GB of data will be at 4G speeds (This is the reason why Zero1's plan is compared against Singtel's 5GB plan and not the 10GB plan). All data after that will be throttled according to the network capacity and performance. Thirdly, for Zero Mobile, any excessive, unreasonable, fraudulent or unapproved usage might be charged at the commercial rates mentioned below.

In the final analysis, most people would not need unlimited talktime, SMS or data. The base plans from Singtel (150 mins of talktime and 5/10GB of data) are sufficient, with a caller ID add-on at $5.35. From this perspective, MVNOs' plans are generally still more expensive than Singtel's plans. Customers who need a lot of data and are attracted to MVNO's plans belong to the minority.

Conclusion

Although MVNOs have exciting promotions, in reality, they are hampered by the fact that they need to buy network capacity from the traditional telcos, and telcos will not offer them such low prices that the MVNOs can undercut them. The relationship between MVNOs and traditional telcos is similar to that between a landlord and tenant; because the tenant has to pay rent to the landlord, he will never be able to offer lower prices than the landlord on a sustainable basis. Thus, MVNOs will not cannibalise traditional telcos' existing business.

See related blog posts:

• Will SIM-Only Plans Cannibalise Regular Telco Plans? 
• Impact of Data Upsize Plans on Telcos
• Do Telco Investors Need to Fear the Fourth Telco?