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Telcos: Moving Fast Forward

TELECOMMUNICATIONS companies (telcos) are expected to play their cards differently this year, given the almost saturated market and imminent implementation of mobile number portability.

Over the past few years, the big players – Telekom Malaysia Bhd via its local mobile unit Celcom (Malaysia) Bhd, Maxis Communications Bhd, DiGi.Com Bhd – have been engaged in a prepaid starter pack price war.

Prepaid starter packs, sold at more than RM100 four years ago, went for as low as RM5 last year.

As a result of the price slashing, coupled with the introduction of affordable mobile handsets, more Malaysians became handphone users and the industry saw a surge in mobile phone penetration rate.

From about 36 per cent in 2003, the penetration rate increased to 81.6 per cent in September last year, representing more than 21 million Malaysians.

With prepaid packs selling at “very affordable” rates and more than eight out of 10 people owning a mobile phone today, one question arises: Do the telcos see a need to further slash prices of prepaid packs to capture what’s left of the market?

Analysts and industry observers believe the industry is at the tail-end of the prepaid starter pack price war.

“The price war is, if not over, almost over,” said OSK Research Sdn Bhd analyst Jeffrey Tan.

“The majority of the population which have yet to purchase a starter pack at the entry level of RM5 will likely not find cheaper packs any more attractive or better value. Instead, they will be looking at the free airtime and SMSes offered by the telcos,” Tan said.

With only a handful of new subscribers left in the market to tap and prices of prepaid packs already set very low, mobile phone operators are expected to look into other areas to generate more revenues and profits.

Analysts said the telcos may consider offering more freebies, including airtime and SMSes, and promoting bundled services to boost their data revenues as well as reduce call tariffs.

The move to reduce call rates is not new. In fact, telcos had lowered their post-paid call tariffs in 2005 before doing the same with prepaid call tariffs a year later.

“I will not be surprised to see them reducing the post-paid call rates next year; after all, there’s still space for reduction,” Hwang-DBS Vickers Research Sdn Bhd analyst Ong Boon Leong said.

Besides the near-saturation of the mobile market, another potential “danger” looms for the telcos – the implementation of mobile number portability (MNP).

MNP allows “dissatisfied” post-paid or prepaid customers to change their mobile service providers without having to change their existing phone numbers.

The Government has said that MNP will take effect by the end of this year.

Some see MNP as a crucial point for the telcos as it could turn the table around. Imagine that if 10 per cent of Maxis subscribers were to switch to rival Celcom, the industry would see the market positions of the top two mobile players switched almost immediately.

However, industry observers have said they do not expect the market to go “wild” when MNP option becomes available.

“Customers may be worried about technical and configuration issues and decide to wait and see before changing service providers,” an analyst from a local research house said.

To minimise the potential negative impact of MNP, analysts expect the telcos to put more emphasis on retaining customer loyalty by beefing up their customer service division, introducing promotions to entice prepaid customers to migrate to post-paid and offering more rewards to long-time customers.-BTimes

About Kugan

Kugan is the founder of MalaysianWireless. He has been observing the mobile industry since 2003. Connect with him on Twitter: @scamboy