Not often in the Singapore telecom market does a bombshell drop as dramatically as the now seemingly failed M1 sale to Simba this week.
The government regulator’s review of the acquisition had taken months since the proposed buyout was announced in August last year, but not many industry watchers would have expected the next turn of events.
Yesterday, the Infocomm Media Development Authority (IMDA) caught many by surprise by saying Simba was being investigated for allegedly using frequency bands it was not assigned to provide mobile services.
That is an uncommon and certainly serious charge, accusing the country’s fourth telecom operator of using a part of the precious airwaves that it is not allowed to use.
Not many details have been revealed by IMDA, but this investigation means it is suspending its review of the most consequential merger in the market in years.
This throws up so many questions. Immediately, you have to ask what Simba’s next move is. With Keppel, the owner of M1, now saying it would let the deal lapse this week, Simba has been left at the altar without a bride.
For one, it must have spent the past several months readying to take over M1’s customer database and, more importantly, the company’s 5G network.
That ready-made network means Simba could have met its 5G licence requirements without paying more to complete its existing 5G buildout. Now, without M1, Simba can’t avoid the costly investments involved.
More importantly, can Simba even finish its network in time? After spending so many months in this failed buyout, it now has just a short few months until the year-end deadline to deliver. Will IMDA give it more time?
If this spells trouble for Simba, things don’t look rosy for M1, either. It, too, has lost precious time and momentum during this review period.
Keppel now says it has a “Plan B” to reduce costs and “right-size” the company without affecting customer experience. This feels like squeezing an already over-juiced orange.
One way is to run M1 like Simba would have. In other words, cut all prices down to what Simba offers now – as low as S$10-a-month for some mobile plans – and surely, reduce headcount to make the bottomline work.
Yet, doing so could also cut M1 to the bare minimum, hardly the kind of look that would be attractive to a potential future buyer.
Could M1 still go back to StarHub, once rumoured to be its match before Simba swept in with a proposal? Possibly, but you can’t blame any new suitor for having doubts.
After all that’s transpired – and we’re still pending IMDA’s investigation – M1 and Simba can’t carry on as before. It’s uncertain how each can turn around its fortunes in Singapore’s cut-throat market.
For consumers, the future is not easy to predict as well. Amid the uncertainty, it is unlikely Simba will suddenly raise its bargain-basement prices. That’s assuming it already has the cash to finish building out its 5G network.
M1 could possibly become Simba-like, if Keppel decides to go all out to reduce an asset it’s been wanting to sell off, which means consumers could get better deals from yet another telco in the short term.
Over time, however, you have to ask if all this is sustainable. To be clear, none of the telcos in Singapore are losing money, but their investors might be impatient for more returns and grow reluctant to bankroll the next big network upgrade.
The good news is that 6G is still a long way off. And 10Gbps fibre broadband networks are already in Singapore, thanks in part to government funding.
So, a large portion of costs for the telcos (except for Simba) will be for maintaining existing networks and ensuring they deliver the quality of service needed.
That, actually, is what the IMDA should look out for after this failed deal. Prices may be at their lowest now but if this means poorer network coverage in return, then it’s not a fair deal to consumers, either.
No matter if the market can support three or four telcos, they are still providing a crucial service, as costly and disruptive outages of late remind us.
You’d hope that the foundation of a digital economy is a solid nationwide network, instead of a patched-up or stripped-down one that is a result of a distressed, uncertain market.
