International -- Asian Business: SINGAPORE
THE CELLULAR OPERATOR THAT'S SHAKING UP SINGAPORE (int'l edition)
Upstart M1 is looking tough as it tackles Singapore Telecom
When Singapore opened its cellular phone market to competition in April, a brash upstart stepped into the game: MobileOne Asia. With backing from major international players, it touched off a telephone war with state-owned Singapore Telecom (Singtel) by cutting its rates by 30% and upgrading service. Already, M1 has nearly 100,000 subscribers. "For everybody, breaking the monopoly has been a win-win situation," says M1 CEO Neil Montefiore.
Despite his fast start, Montefiore is in for a fight. He's up against a tough adversary. After Singapore Telecom got pounded in the stock market, losing 20% of its market capitalization, or $7 billion, it decided to match M1's lower prices and better services. The state utility, which received $1.1 billion in government compensation for the loss of its monopoly, doesn't intend to concede the fight. "Singtel is a more robust animal than M1," says Adam Quinton, a telecom analyst at Merrill Lynch & Co. in Singapore. And Singtel CEO Lee Hsien Yang, son of Singapore's guiding Senior Minister Lee Kuan Yew, warns that Singtel is prepared to "compete on price alone."
M1 looks impressive, however. In just six months, it has parlayed a $240 million investment into a network of 230 base stations across the island and mounted an aggressive ad campaign to use it. Half the cell phones now sold in Singapore are M1's, giving the network a market share of 16% so far. Merrill Lynch estimates revenues will reach $36 million this year and $80 million in 1998. Jardine Fleming Securities expects M1 to break even in 1998, three years ahead of schedule. And that puts M1 in a good position for its next move: a bid for fixed telephone lines to be auctioned by the government in December.
Montefiore got a major break: The Singapore government made sure he got a level playing field--which allowed M1 to build its entire network before it started operating. And that eliminated Singtel's only real advantage: coverage. "The typical incumbent's competitive position was denied to Singtel," says Quinton. That left Singtel having to compete on service and pricing alone, areas where it was behind M1.
M1 also has the benefit of savvy shareholders: Britain's Cable & Wireless and Hongkong Telecom, which together own 30% of M1, have both fought tough cell-phone battles on their home turfs. "We knew we could not just come in and be different. We had to be better," says Montefiore, who used to run Hongkong Telecom's cellular network. So M1 offered free trials and inexpensive package deals. Crowds lined up around the block for a $130 Alcatel handset and a 40% subscription discount when service began.
KEEPING IT CLEAN. Now, M1 and Singtel are duking it out. M1's cheap weekend rates kick in on Friday evening, but Singtel's don't start till Saturday. M1 offers free voice mail, whereas Singtel charges for it. Clerks at the M1 Shop smile and greet customers--a skill Singtel's Teleshop staff have yet to master. But Singtel made its phone bills easier to read, and it invested $66 million to improve its 350 base stations so that phones would work better in cars. It now throws an extra, higher-quality battery into its package. M1, though, can strike a better deal on trade-ins, says one satisfied customer.
Singapore regulators have their hands full keeping the fight fair. In June, the Telecommunications Authority of Singapore fined Singtel $3,330 for accidentally jamming M1's signals. In early September, the regulator fined M1 the same amount for using an unauthorized test frequency. Singtel's Lee accuses M1 of "trying to see how far you can push the rules without getting your fingers beaten."
There's still plenty of room for competition in this crowded island of 3.5 million. That's why the government is taking bids for a license to install and operate fixed lines. For that, M1 plans to bid against the giants: British Telecom, Nippon Telegraph & Telephone, and WorldCom. The winner of that contract's ensuing competition with Singtel could make M1's battle for the cellular market look like a mere scuffle.By Michael Shari in SingaporeReturn to top