Singapore's open market appeal

Telecommunications International, August, 2001 by Matthew Secker

The Singapore market, following liberalisation and its subsequent threat to SingTel's dominance, is fastpaced and an important telecoms hub for the region.

Despite an industry slowdown (and possibly an overall downbeat mood from exhibitors] Asia Pacific's largest telecorns trade show -- CommunicAsia 2001 -- (along with the BroadcastAsia 2001 show which was held concurrently) registered nearly 49,000 trade visitors and brought together 2,400 companies at the Sin gaporeExpo exhibition centre held between June 19-22. These figures indicate that the industry-to-industry event remains an important and viable platform for companies to meet, promote and be active.

Even SingTel, Singapore's incumbent and largest operator, decided to appear this time. Lost year it opted to bypass the event, much to the surprise of John Poston, senior vice president of international and wholesale for new entrant StarHub (backed by BT and NTT) and now the country's second largest operator after starting operations back in April 2000. "I think that SingTel's non-appearance last year was a misjudgment, frankly. After all, it is an industry-to-industry event, and our position has always been that you need to get out and meet as many in the industry as you can.

Outside of the show, the Singapore telecoms market does not seem to be giving off any alarming signals. Indeed, according to a discussion involving experts from the wireless industry based in Singapore, the market is one of the best-placed countries in the region to be a test-bed for wireless applications. This conclusion was drawn from the fact that mobile penetration stands at 71 per cent (one of the highest in the world) while internet penetration and a healthy per capita gross national product (GDP) make Singapore an ideal early adopter of new technology. The panel also stated that the country's small geographic size allows services to be rolled out to the entire population simultaneously, unlike other countries.

An open marketplace

This attractive market environment can be attributable in large part to the wave of liberalisation that has swept the island. In April 2000, the IDA (Singaporeon regulatory body) introduced two significant pieces of telecoms legislation which have opened up the marketplace. The first was the Telecoms Competition Code (TCC) which details the rules and guidelines for competition. The second was the Interconnect Offer Agreement. This law stipulates that any licensed operator can interconnect with SingTel. The IDA has been widely praised for introducing these two pieces of regulation following a consultative and open process. The general view is that these laws have reduced the timescale for new entrants to start services, and they can now operate under well-understood terms and certain rights which they didn't previously have. "These laws were vital because the power of SingTel is extremely strong," says StarHub's Poston. "You have to have significant regulation for a period in order to make sure that a competi tive basis is created."

Some would argue that the Singapore government's 78 per cent stake in SingTel would also have a significant adverse effect on a competitive marketplace. "That is perceived to be a much more serious issue outside than inside Singapore," says Tan Tong Hai, president and CEO for Pacific Internet, one of country's leading internet service providers (ISPs) -- alongside SingTel - with more than 350,000 subscribers. "Within every market in Asia you will have a telco which is majority-owned by the government. After all, we are 56 per cent owned by Temasek Holdings, a government-owned holding company." StarHub is also 60 per cent owned by Singapore Technologies, which in turn is ten per cent owned by the government. According to Poston, the government's day-to-day involvement in companies that it holds stakes is greatly limited and there is a clear policy of increasing the amount of private ownership of these companies whenever possible. Poston also points out that Singapore government support, rather than being a ne gative issue, can in practice be a very positive thing. "For such a small country, there has been a lot of success stories. We would not have had SingTel or Singapore Airlines otherwise."

The Singapore government has also said that it will not interfere if companies want to merge or become partners. StarHub has recently said that it will combine with Singapore Cable Vision (SCV), the cable TV monopoly. In October, Telstra and Davnet, both based in Australia with separate phone licences in Singapore, forged a marketing alliance. SingTel had wanted to buy MobileOne (M1), Singapore's second largest mobile operator, which would have given it a 90 per cent market share. It later changed its mind, in part due to regulatory concerns. But public government acceptance of such deals could well lead to more because the S$6 bn ([epsilon]3.8 bn) market of just four million people is probably too small to support such a high-level of new entrants.