Further info was available on MyRepublic's mobile biz plan. Let’s look at the brief biz plan. This is probably the longest post I have written.
The plan, in brief, is
- 250,000 customers in its 1st year in operation
- Profitable in its 3rd year in operation
- 700,000 customers within the 5th year in operation
MyRepublic is likely to offer unlimited data-plan at about $50 per user per month, which is about the same as the magic number used in its fiber broadband plan. The break-even point is in its 3rd year in operation, with my estimation on customer base of 500,000. The annual mobile revenue with an ARPU per month of $50, is $300 million, which should be the operating expenses, both fixed and variable parts
On the 5th year milestone, the mobile revenue, with similar assumption, is $420 million with 700,000 customers. The net profit margin is about 29% if expenses remain the same. In reality, the margin should be few percentages lower due to higher variable expenses with higher customer base. The final margin should be above the net profit (on service revenue) of M1, at 22%. I reckon, MyRepublic is right, the “extra” cost of an under-utilized network, is well compensated by its unique biz model, at least on paper.
IMO, a disruptor who has targeted the core market of incumbents, is less likely to success. It is more so, if the segment targeted is the high-end segment i.e. the most lucrative segment. Of course, the assumption is no regulatory interventions which might block or greatly reduce the competition from incumbents. Let’s examining on the MyRepublic mobile biz plan
The biz plan focuses on data-hunger mobile customers, which are willing to pay more for an unlimited plan. Mobile biz is the core market of incumbents, and the targeted customer segment is the most lucrative segment i.e. those who are paying extra for data usage. The incumbents will definitely readjust their price plan to match and compete. They will fight hard, to kill the disruptor, at birth if possible. Tiered plans have been offered by incumbents now, to cater for different customer needs. The similar tiered plans are effective to fend off competition, with acceptable impact on revenue. The same approach was used in fiber plans, which proven effective, in both top-line and bottom-line of incumbents.
Next question, isn’t MyRepublic has done it with fiber broadband market, what not in mobile market? Anyway, MyRepublic has captured 4-5% of market share, and the targeted mobile market share is ONLY 9%?
First, in fiber broadband market, the high-end market is the corporate customer, both enterprises and government agencies. Furthermore, both StarHub, and SingTel were dragged by their legacy broadband network in the competition. Anyway, MyRepublic has captured a 4-5% market share. I am not sure it is the target, which I am really doubt. The targeted mobile biz is the high-end segment of core market for incumbents. The competition is for survival.
Next, the fiber broadband residential biz, is a commodity biz, with minimum fixed cost involved. While a large part of cost, is the fixed cost (infrastructure and spectrum) for mobile biz.
The game-changer, is regulatory intervention. Concessionary reserve price has been given by iDA on spectrum bidding. I reckon the new mobile operator needs more than just 60MHz and it should bid more in the second round open bidding. So far no further disclosure on the national roaming, which is ultimately important, IMO. I reckon it is equally important to MyRepublic, which has emphasized on the matter in its document to iDA. I am highly doubt iDA will relax the QoS and national coverage requirements, to reduce the installation fixed cost, which is very unfair to incumbents.
In short, up to now, pending for further disclosure(s), I am not optimistic on MyRepublic mobile biz plan. It is nice on paper, but not appealing in execution. What do you think on the topic?
(vested in M1)