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Chua Hian Hou
Tue, Aug 19, 2008
The Straits Times
Number portability led to $100m marketing war

When bank officer J. Low's mobile phone contract with SingTel expired in February, she held off on signing another contract.

She bet that when mobile number portability came Singapore's way in June, all three telcos would be falling over themselves to win her business.

And she was right.

'It was amazing. There were ads in The Straits Times every single day and I was checking them out daily for the best deal,' she said.

In the end, neither StarHub nor M1 was successful in wresting her away from SingTel.

SingTel had dangled an offer too good to resist: the chance to buy a high-end Nokia N95 phone, which has a five-megapixel camera and wireless Internet capabilities, almost for free.

So she decided to sign another two-year contract with SingTel in June.

Companies rarely manage to put a price on retaining customers like Ms Low, but Singapore's mobile phone operators now have a pretty good idea - about $100 million.

That is what SingTel, M1 and StarHub are estimated to have splashed out in a free-for-all of advertising, handset subsidies and other sweeteners in the lead-up to number portability on June 13.

Number portability lets a user keep his number if he changes telcos. It removed one of the biggest barriers to switching as many users did not want to lose a number known to friends and family.

The prospect of millions of customers suddenly up for grabs unleashed a ferocious marketing and customer retention campaign that dominated press and prime-time TV for weeks leading up to June 13.

The figures - derived from the telcos' recent financial results - indicate the intensity of the fight for customers in the mobile market.

The aim of the blitz was clear: keep existing customers from jumping ship while trying to entice users signed to rival firms to do just that.

But so far, the outcome also seems clear: Few people have changed operators despite the inducements.

All three telcos are reporting lower-than-usual rates of churn - a measure of the number of customers that leave.

Indeed, StarHub's churn rate of 0.8 - just eight out of 1,000 customers - was the lowest in its eight years as a mobile operator.

Infocomm Development Authority, the industry regulator, said just 6,500 users had switched operators two weeks into number portability. Singapore has more than six million mobile phone lines.

But this number does not take into account users who stayed put. Many, like Ms Low, did so because of the lavish freebies they were offered.

And many others are still locked into earlier contracts and cannot switch yet.

The bosses of the three telcos admitted that even though the number portability war had not been as bloody as it could had been, their bottom lines took a hit from the costly campaigns.

But they also think competition has peaked. StarHub chief executive Terry Clontz said last week that he expects a 'return to more sensible levels (of competition) in the second half of the year'.

This should bring down costs and lift profit margins.

But SingTel has vowed that retaining market share remains vital so this should ensure that some goodies keep coming.

Its chief executive officer for Singapore, Mr Allen Lew, said last Tuesday that 'owning customers is very important to us' and that the telco is perfectly willing to 'accept short-term margin hits' to accomplish this goal.

This is good news to computer engineer Eugene Lim, who had been worried that he had missed the boat as he still has three months left on his mobile contract.

He told The Sunday Times that when the deal expires, he 'may get the iPhone 3G if SingTel offers it at a reasonable price. If not, hopefully M1 and StarHub will give me a good deal on it once they get some stock'.

This story was first published in The Sunday Times on 17 August 2008.

For more stories, visit straitstimes.com.

 

 
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