Smaller mobile players erodes prepaid market share from major cellular providers
KUCHING: In a world with intensifying competition, it comes as no surprise that telecommunication players fight aggressively over market share.
Market share is a good gauge of how influential a company is. It determines the portion of a market controlled by a particular entity of product.
In Malaysia, an interesting trend observed is that smaller mobile virtual network operators (MVNOs) have been steadily eroding prepaid market share from the Big Three cellular providers Maxis Bhd (Maxis), Celcom Axiata Bhd (Celcom) and DiGi.Com Bhd (DiGi).
According to analysts from the research wing of TA Securities Holdings Bhd (TA Research), since the second quarter of 2011 (2Q11), smaller players have been steadily ‘nipping at the heels’ of the top three major celcos in Malaysia.
It noted that within a period of three years, market share for local MVNOs in the prepaid segment have increased significantly from eight per cent in 1Q11 to 18 per cent in 4Q13.
“On the bright side, market share for these players appear to have stabilised at 18 per cent throughout 2013,” the research arm commented in a report.
Who is losing out?
Under the prepaid segment, TA Research went on to point out that the biggest loser to date being Maxis, which saw its share of the prepaid market tumble from a peak of 34 per cent in 4Q10 to 27 per cent in 4Q13.
In contrast, DiGi and Celcom remained resilient, with market share ranging steadily between 25 and 28 per cent, and 29 and 32 per cent respectively in 2011 to 2013.
Looking at the overall prepaid segment in the country, it noted that total prepaid subscribers in Malaysia face moderating growth at an average of 10 per cent year on year (y-o-y) over 2009-13 on the back of high mobile penetration rates (144 per cent as of 4Q13).
Reaching its peak
According to the research arm, Malaysia’s stretched mobile penetration rate indicates tapering subscriber growth moving forward.
Malaysia’s rate of 140 per cent exceeds that of developed markets such as South Korea with 111 per cent and Taiwan’s rate of 127 per cent, and is among the highest in Asia.
In fact, it pointed out that Malaysia is closing fast on the gap with Hong Kong (230 per cent), Singapore (152 per cent) and Vietnam (149 per cent), the only three countries which have higher mobile penetration.
“Therefore, Malaysian celcos face an uphill challenge to preserve market share and margin against the backdrop of competition from MVNOs, sluggish population growth, and high mobile penetration,” the research arm observed.
TA Research opined that celcos stand to lose precious market share in the prepaid segment given intense competition from MVNOs and slowing industry subscriber growth.
While DiGi and Celcom have been resilient in maintaining market share in the past two years, it appears that MVNOs, in particular UMobile and Tune Talk Sdn Bhd (Tune Talk), have gained an additional 10 per cent market share over 2011-13 mostly at the expense of Maxis.
“We expect Maxis to lash back at competitors under the stewardship of new chief executive officer, Martin Lundal, whom had indicated his intentions to regain lost subscribers,” the research arm opined.
Nevertheless, it observed that other players are not resting on their laurels either, with U Mobile and Celcom introducing the cheapest rates for voice and data.
“Meanwhile, Tune Talk is also establishing a regional Asean presence to enhance its value proposition,” it added.
Regarding celcos’ earnings prospects, TA Research opined that mobile players face earnings headwinds from heightened competition, escalating handset subsidies, and shift in usage to low-margin data services away from traditional voice and data.
Against this backdrop, it maintained its ‘neutral’ stance on the telecommunications sector.
As it becomes apparent that smaller mobile players and MVNOs may eventually capture the larger share in the prepaid segment, BizHive Weekly gives an update on the two small-cap operators U Mobile and Tune Talk, while also taking a closer look at the latest entrant, FRiENDi mobile Malaysia.
U Mobile – an all-rounded contender
One of the more established players in the smaller mobile market is U Mobile Sdn Bhd (U Mobile) which has made its mark by being a dynamic and innovative mobile telecommunication service provider, offering next generation mobile consumers the freedom to always be connected.
One of the biggest factors that sets U Mobile apart from other telcos is the range of products it has that appeal to different segments of the market according to their needs and varying lifestyles.
Through in-depth study of consumers’ needs and requirements for their daily mobile usage, it aims to provide high quality mobile services priced affordably as well as bundling them with attractive value-added services.
In addition, U Mobile notably has one of the most unique telecommunications network structures in the region backed by its own-built network infrastructure, which supports high-speed mobile broadband; and Asia’s first active 3G Radio Access Network (RAN) sharing, covering major urban areas in both East and West Malaysia.
U Mobile, which offers a variety of prepaid, postpaid, high-speed mobile Internet plans and the latest mobile devices, is currently available nationwide in terms of network coverage.
In an exclusive interview with BizHive Weekly, U Mobile chief executive officer (CEO) Wong Heang Tuck highlighted that the prepaid and postpaid market in Malaysia and Sarawak, specifically, still has plenty of potential for growth.
This, he noted, is especially so in the latter with the increment in smartphone adoption and penetration in East Malaysia.
“The accessibility of these smart devices has spurred the demand for high speed, high quality mobile internet services, which gave U Mobile greater opportunity to expand our reach, presence as well as our business in East Malaysia,” Wong explained.
With reports suggesting that the country’s larger cellular providers are losing their prepaid market shares to players such as U Mobile, it can be observed that the situation is certainly no different in East Malaysia.
Wong highlighted to BizHive Weekly that a majority of U Mobile’s subscribers in East Malaysia are in fact prepaid subscribers, driven by their value propositions and competitive price points as compared to their competitors in the market.
“For example, our UMI28 plan is our most successful product in East Malaysia, especially with #thebestfree proposition that U Mobile is offering with its large high speed quota and unbeatable free calls and SMS,” he enthused.
As for U Mobile’s postpaid services, the Unlimited 50 is the most popular choice amongst its customers as the plan meets the needs for average Internet and voice service users.
Wong explained that at an affordable rate, users can enjoy unlimited high speed mobile Internet as well as unlimited on-net calls for customers to be constantly connected with their friends and family.
“All our postpaid comes with unlimited mobile Internet and on-net calls which has been very well-received by our consumers,” he added.
Generally, U Mobile sees East Malaysia as a high-potential market, as smart device and Internet penetration are gain good tractions in this region.
Having opened up a new U Mobile service centre in Kuching earlier in March, Wong reiterated that the reason behind this is that they view Sarawak as a high potential market and understand their customers’ growing mobile consumption.
As such, the company strives to accommodate consumers in the region further, especially in terms of providing assistance and increasing convenience for all its customers in the East Malaysian region.
On that note, Wong highlighted that one of U Mobile’s distribution strategies is to opt for both traditional and non-traditional channels such as 7-Eleven, Cosway, 99Speedmart, SenQ, SenHeng and GCH Retail outlets.
These, he noted, increases touch points and avenues for all consumers to gain easy access to U Mobile products and services.
Overall, U Mobile is looking to further expand its presence in the East Malaysian region, especially to other major cities in Sarawak.
“There are definitely plans within the pipeline. We will be sharing more information in regards to this once we have confirmation,” Wong said.
To date, U Mobile’s performance has been progressing well with its subscriber base increasing steadily and its coverage expanding to a nationwide level.
With U Mobile’s network penetration rate currently between 50 and 60 per cent across major towns and cities in Sarawak, Wong emphasised that they will continue to expand their network rollout in the region, as East Malaysia is one of the focus areas for development and growth moving forward.
All in, U Mobile’s outlook for the year 2014 is to increase market share by 30 to 40 per cent from last year’s subscriber base of five million subscribers.
“U Mobile is ready to progress forward as an aggressive player and as a distinguishable challenger brand that offers the best innovative and affordable products in the market,” Wong said.
In fact, Wong shared that U Mobile’s customers can expect to see more strategic partnerships to either broaden consumer touch points or enhance their mobile experience, both of which he is confident will catapult the telco’s business forward.
“U Mobile fans and customers should definitely keep a lookout for more exciting products and services from U Mobile.
“There will be more existing products coming your way soon and U Mobile certainly looks to challenging the norm with what we bring,” Wong concluded.
Tune Talk – the ‘Fighter’ brand
When it comes to branding, Tune Talk Sdn Bhd (Tune Talk) is literally bringing the fight to the people.
The group as one of the country’s fastest growing mobile prepaid service provider is known for its simple, value-for-money products with easy accessibility and wide distribution reach.
Operating as a mobile virtual network operator (MVNO) riding on Celcom (Malaysia) Bhd’s (Celcom) extensive nationwide network, Tune Talk’s business model allows the company to focus on its products, marketing and customer service without the need to build and maintain a full cellular network.
Hence, Tune Talk can keep its capital investments low and focus on continuously offering low rates and giving subscribers quality customer service.
On how Tune Talk sets itself apart from other MVNO players, chief executive officer Jason Lo, highlighted their intention not to differentiate themselves from other MVNOs but from incumbents particularly Maxis Bhd’s Hotlink and DiGi.Com Bhd (Digi).
Lo affirmed that Tune Talk is generally more than 50 per cent cheaper in their services and run their customer care in house to give the best attention to Tune Talk subscribers.
“Most of our over one million active subscribers come from DiGi and Hotlink and we hope to maintain them with basic principles of high service quality and unbeatable value as well as a loyalty system unrivalled in the telco world,” he added.
Tune Talk is uniquely positioned with their alignment to AirAsia Bhd (AirAsia) and Tune Group, as well as their community building in both the music and Mixed Martial Arts (MMA) scenes.
For instance, its partnership with insurance partner Tune Insurance Malaysia Bhd allows each Tune Talk subscriber to enjoy a RM100,000 Personal Accident coverage.
Aside from offering insurance coverage, Tune Talk Mobile Prepaid is also a participating partner of the AirAsia BIG Loyalty Programme.
This means that subscribers can accumulate BIG Points every time they top up to redeem for devices, concert tickets, movie tickets, free services and much more.
Another successful Tune Talk partnership has been with Malaysian Invasion Mixed Martial Arts (MIMMA), an alliance focusing on youth and sports.
On how this partnership has boosted Tune Talk’s branding and advertising among the general public, Lo explained that the collaboration with MIMMA is a long term project designed to align them with the fastest growing sport in the world.
Lo pointed out that Malaysia is a melting pot of hundreds of martial arts disciplines and MMA is the only platform where Silat, Wushu, Karate, Jujitsu and others can compete together.
“Our adopted sport is not badminton or golf, but rather a sport more closely associated with the youth segment who are dedicated, disciplined, honourable and hard working – traits which we at Tune Talk hold in high regard and aspire to.
“Plus, we fight too! We fight for low mobile rates and aim to maintain that position as the best value in the country,” he enthused.
Lo further added that awareness in this sport is increasing daily and it is only a matter of time before Malaysia has a world champion.
“We are a fighter brand and we believe that many of our subscribers and associates can relate to that,” he said
Aside from being uniquely positioned, Lo emphasised that Tune Talk has an excellent social media team which carries the highest Klout score out of all the prepaid service providers in the market and constantly engage their customers and potential customers via an active Facebook and other social media platforms.
“We will continue to engage our customers and strive to be the best prepaid sim available in the market,” he promised.
Focusing on Sarawak specifically, Lo is pleased to share with BizHive Weekly that the state is actually Tune Talk’s strongest market outside of Kuala Lumpur and Selangor.
“We are overjoyed that Sarawakians have increasingly adopted our services as we provide coverage across the entire state.
“Being Sarawakian myself, I’m glad we have the support of the largest and most awesome state in Malaysia,” he proudly added.
On the whole, Tune Talk’s overall base has grown significantly over the last quarter in particular.
The telco has also had a major capacity upgrade to facilitate service levels and is seeing average revenue per user (ARPU) push towards a healthy RM50 mark thanks to accelerated growth in data usage.
In addition, Tune Talk’s market penetration continues to increase, despite the level of mobile saturation and new entrants.
“This is in part thanks to our loyal and expanding dealer base and exclusive availability on board AirAsia flights and Tune Group properties,” Lo explained.
Regarding the outlook for Tune Talk in overall Malaysia, Lo expects strong growth in subscriber base of around 20 per cent to 30 per cent based on historic growth pattern.
In Sarawak specifically, he highlighted that Tune Talk’s unmatched coverage of Celcom’s network in the state puts them in a particularly relevant position as they expand their dealer base in the interior as well as strengthen their strongholds in areas like Sibu, Bintulu and Kuching.
“We expect to see double digit growth in Sarawak as we have aggressive programs to roll out this year. We also target long-term evolution (LTE) towards the fourth quarter (4Q),” Lo projected.
Aside from their LTE plans this year, he pointed out that there are always the massive events Tune Talk drives each year around the country .
“We are also nearing the launch of our special roaming services at local rates as well as regional expansion across Asia,” Lo enthused, adding that they also have several over-the-top value added services on the way, designed to shake things up.
FRiENDi — the ‘Newcomer’
FRiENDi mobile Malaysia (FRiENDi), the fresh-faced mobile service provider which entered the Malaysian market last year, still believes there is room for growth in the country despite the nearly saturated market.
FRiENDi currently operates as a mobile virtual network operator (MVNO), riding on U Mobile Sdn Bhd’s (U Mobile) mobile network.
Owned by Virgin Mobile Middle East and Africa (Virgin Mobile MEA), Kumpulan Perangsang Selangor Bhd and Samena Telecom Ltd, FRiENDi is designed by people with relevant expertise and is backed by the global operations of Virgin Mobile MEA.
During the launch in Kuching last year, FRiENDi director and board member Michael Klindt had pointed out that while Malaysia is undisputably a mature market for basic voice and and messaging services, there were still many things that can be done to give customers better mobile experience.
Fast forward eight months later, BizHive Weekly caught up with marketing director Lim Eng Kuan who shared with us the latest updates on FRiENDi’s progress here.
Lim revealed that since its launch, FRiENDi’s performance has been positive to date, having acquired a customer base of more than 250,000 and having made major progress in East Malaysia.
“Sarawak contributes to about 15 to 20 per cent of our entire subscriber base. It’s not as much as we have expected initially, but Sarawak being one of the largest state in Malaysia, we’ll definitely be putting in more effort to acquire more customers there,” he highlighted.
In a bid to acquire more customers and increase its subscriber base, FRiENDi recently launched its new value proposition to reward its customers who have accumulated reloads of RM20 with a bonus credit of RM5.
“Our target is to increase our subscriber base to 500,000 and hopefully with the new value proposition we can achieve this target in the next six to 12 months,” Lim enthused.
Overall, Lim believes that there is definitely room for growth in the prepaid segment in Malaysia and in Sarawak specifically.
Lim pointed out that mobile phones are no longer considered as luxurious items as before, adding that it is a necessary item to have today.
“As mobile phone technology keeps evolving with most of them having dual SIM capability, it is not surprising that one customer can be holding onto multiple prepaid SIM cards,” he explained.
For that reason, he believes that there will always be opportunities for growth in the prepaid segment
On what FRiENDi currently has to offer prepaid consumers in this competitve environment, Lim noted that the operator’s services are generally the same as all other MVNOs, calls, SMS and internet.
That said, Lim stressed they aim to provide the best value to customers via their unique mobile packages.
An example is FRiENDi’s recent reload bonus which ensures lifetime validity whereby validity will be extended 30 days as long as users make a call, SMS or use the data service.
For its data segment, the MVNO has created ‘bite size’ bundles to cater for lighter users.
When customers finish using their data they can just re-purchase another bundle, thereby extending the validity for another 30 days again.
On whether FRiENDi will be setting up a service centre anytime soon, Lim replied that once FRiENDi has a significant customer base, they will definitely explore the possibility of having the service centre in major cities.
For now, FRiENDi provides a good customer care team which is available daily from 8am to 11pm to support any customer enquiry.