How will M1 acquisition affect telco market

This may be a lost opportunity for other players.

Simba Telecom Pte. Ltd.’s acquisition of M1’s telecommunications business is seen to lower the market’s competitive intensity.

“We see an opportunity lost for StarHub, which will now have to contend with a significantly larger challenger with improved scale and efficiencies,” RHB said in its new analysis.

Keppel Ltd. has announced that its agreed to sell M1’s telecommunications business to Simba Telecom for $1.43b in cash. It will receive about $1b for its 83.9% stake in M1.

“We think Simba- M1 could still drive market share gains with discounted offerings in the medium term with price-ups to happen over time, corresponding with network improvements,” RHB said.

Meanwhile, Maybank said that the acquisition is positive step towards rational competition as operators in Singapore have competed intensely for the past several years.

“M1 and Simba combined will lead to equitable market share amongst telcos,” it said. “Whilst Simba entered Singapore as an aggressive #4 mobile operator’ in 2020, the real reason for the competition was the incumbents’ response by offering cheaper packages through digital brands as well as through mobile virtual network operators (MVNO).”

MVNO contracts are typically 3 to 5 years with limited sales channel reach. Maybank sees potential for competition to start subsiding over the coming years with consolidation.

The bank expects the “merged company will gain spectrum market share and network superiority” a huge differentiator is not sees as Singapore already has wide network coverage.

Maybank said that Starhub will also benefit from network synergies as Starhub and M1 operate a singular 5G access network.

“Starhub won’t be footing the bill of industry consolidation and complex network integration, and as such, we see better certainty of its dividends,” the company said.

Singtel is also seen to gain as competition eases. However, the positive impact will be limited since less than 10% of Singtel’s SoTP comes from Singapore consumers, Maybank said.

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