The telco industry is ending 2017 with the worrying prospect of a tougher new year.
The frantic jostling for market share that marked this year can only intensify as new candidates square off for battle.
Australian start-up Zero Mobile elbowed its way into the Singapore market as a mobile virtual network operator (MVNO) this month.
Fibre broadband company MyRepublic plans to make the leap to MVNO next year. And Australia's TPG Telecom is due to enter with its own mobile network.
These moves will follow a year that saw the expansion of MyRepublic and MVNO Circles.Life.
Incumbents also delivered their fair share of headlines, from Singtel's multibillion-dollar NetLink Trust divestment to StarHub's surprise announcement that chief executive Tan Tong Hai is on his way out.
'SMALL AND SATURATED'
If three's already a crowd, then what is the industry to make of the tight squeeze now under way?
Mr Tan, the outgoing StarHub boss, says: "The telco industry experienced some intense headwinds in 2017, including a high-priced spectrum auction, heightened pricing competition with the comeback of unlimited data plans, and a more crowded marketplace with new MVNOs.
"Next year, the competition will be even more intense."
The pressure has been keenly felt in the consumer mobile segment.
As OCBC Investment Research analyst Eugene Chua puts it: "It is certainly crowded for a relatively small and saturated market, with little differentiation in network coverage."
And new entrants come prepared for a price war the incumbents can ill afford. Eyebrow-raising bids at April's spectrum auction prompted analyst concern for telcos' pockets.
Mr Joongshik Wang, transaction advisory services partner at Ernst & Young Corporate Finance, says competition could lead to "downward pressure on the average revenue per user (ARPU) and margins".
To put a number to it, the mobile industry's top line looks set to shrink by roughly 2 per cent next year - around the same pace of decline as this year, according to DBS analyst Sachin Mittal.
"The focus of new entrants would likely be on the acquisition of data-heavy subscribers, which could result in a high single-digit or low double-digit contraction of data yields in 2018," he notes.
TWEAK IN PLANS
Looking further ahead, telcos appear to be bracing (themselves) for a potential price war and fight for market share by offering lower-tier SIM-only price plans that consumers can leverage without need of a long-term contract.
MR JUVANUS TJANDRA, KPMG Singapore partner who heads the firm's telecommunications, media and technology practice.
KPMG Singapore partner Juvanus Tjandra, who heads the firm's telecommunications, media and technology practice, says: "Looking further ahead, telcos appear to be bracing (themselves) for a potential price war and fight for market share by offering lower-tier SIM-only price plans that consumers can leverage without need of a long-term contract.
"In such a scenario, winning the battle for market share may come at the expense of declining ARPU and lower overall earnings."
Mr Mark Jansen, PwC Singapore's technology, media and telecommunications leader, says there is likely to be "initial aggressive pricing" by newcomers who may willingly risk earnings.
"Some of these players have a regional play in mind and view the Singapore market as a 'test bed'... possibly accepting a lower profitability, before rolling out in the rest of the region."
SMALL SCREENS, BIG HITS
The voice-to-data shift will continue to weigh on the sector, given the popularity of over-the-top (OTT) applications such as WhatsApp and Skype.
TWEAK IN OPERATIONS
We expect to see telcos move more and more to infrastructure-light players, who leverage others to become more nimble in the market.
MR MARK JANSEN, PwC Singapore's technology, media and telecommunications leader.
KPMG's Mr Tjandra, pointing to fintech initiatives such as DBS PayLah! and third-party apps like GrabPay, adds: "Payments is an area where digital newcomers have gained traction.
"Another area where telecommunications providers have struggled is in the migration of traditional data centres into cloud-hosting businesses."
One more casualty has been pay-TV, as offerings like Netflix and Amazon Prime Video chip away at "triple play". That refers to the bundle of mobile, broadband and cable TV services, as opposed to M1's modus operandi, a "dual play" of mobile and broadband.
Mr Tjandra notes that incumbents have worked to address the challenge.
StarHub partnered Netflix last year to bring the service to set-top boxes and high-definition streaming.
Hooq - a Singtel joint venture with Sony Pictures Television and Warner Bros Entertainment - hit Singapore's shores last year, and was added in September this year to Singtel's video portal app.
But DBS' Mr Mittal says: "With the emergence of OTT TV services and entry of Netflix in 2016, nearly 89,000 subscribers have withdrawn from pay TV services in Singapore. We believe subscriber losses would continue in 2018, as higher-end subscribers, who may have been using OTT and pay TV services simultaneously, start exiting pay TV services due to the lack of perceived benefits."
OCBC's Mr Chua notes: "The most obvious route so far is diversifying away from the traditional telco space - that is, voice and data services - towards providing enterprise digital solutions and related services."
And incumbents have already made a play for the enterprise segment, in areas such as cyber security, digital advertising and data analytics.
Mr Chua adds: "For instance, Singtel has close to 50 per cent market share in Singapore and this means it has access to the usage patterns and data of all its users. Businesses would want such data analytics to conduct more targeted marketing and advertising activities to optimise each marketing dollar."
But with Mr Mittal noting that "new entrants are not burdened by legacy systems like the incumbents", could the big boys shed their hardware?
PwC's Mr Jansen says "we expect to see telcos move more and more to infrastructure-light players, who leverage others to become more nimble in the market".
And Mr Tjandra foresees that telcos may "de-merge or split themselves into two business models" - turning asset-heavy businesses into infrastructure units that deliver connectivity services, and asset-light digital operations into direct competitors of OTT players.
Already, Mr Martin Nygate, CEO of start-up Velox Networks, predicts that "you'll have companies that own the cables; you'll have companies that provide the technology to move the data along those cables. And then you'll have companies like us, that provide services like calls, videos, chats, whatever it is, on top".
Mr Nygate, who provides businesses with a cloud-based fixed-line phone service, says: "In the past, a 'fully-fledged' telco controlled the whole ecosystem. That ecosystem is broken up now, and they are going to be only one small part of it."
Still, Singtel group CEO Chua Sock Koong notes that Singapore's dominant telco remains focused on both strengthening its core and growing new digital businesses.
"In our experience, a profitable fourth player in well-penetrated markets is rare," she says.
"What is common is industry consolidation in markets with more than three players."
Such a process is already under way in India, Ms Chua adds. "As to whether it happens here or not, (it) depends on a whole range of factors, including sustainable investments."
Meanwhile, gazing into StarHub's crystal ball, Mr Tan says: "As the market searches for a new equilibrium, consolidation in the industry will take place.
"We believe two types of service providers will co-exist in the mobile market: a few full-service telcos, and many MVNOs that are focused on serving niche market segments, such as the youth, foreign workers, expatriates, tourists and so forth."