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M1 Limited

Purpose

This report aims to analyse both macro and micro environmental factors and its

effects on the Telecommunication Industry in Singapore. By analysing M1 Limited’s

opportunities, threats and limitations, the report also seeks to suggest

recommendations to address these issues.

Introduction

Amongst the prominent telecom service providers in Singapore today, M1 Limited

established itself in1997. Some of its major shareholders include SPH, Keppel

Telecoms and Axiata investments (Global Telecoms Insight, 2015).

M1 provides voice and data services for both mobile and fixed-line consumers

ranging across 2G-4G/LTE-A networks. Its mobile services also include prepaid data

plans known as the M card. In a series of firsts, M1 was the first in Singapore to

introduce a nationwide 4G LTE/ 4G LTE-A network; first mobile broadband – M1

broadband; first to launch new advance telecommunication and data services;

Singapore’s first music recognition service known as POINT; and first to offer direct

dial when roaming for pre-paid services (M1 Limited, 2013). As of 2013, M1 serves

over 2 million customers and expanded its service revenue (M1 Limited, 2013).

External Environment Analysis

PESTLE

Political situation

The political risk in Singapore remains relatively low (Corrupt Practices Investigation

Bureau, 2015). Since independence, Singapore’s political stability has created a

peaceful and progressive environment which makes it an attractive place for

investors.

The government has also set up organisations such as the Infocomm Development

Authority of Singapore (IDA) to monitor and regulate the various industries present

here. This ensures fair play and protects consumers by setting standards,

Comment [kc1]: A concise approach to spell out what M1 does.

Comment [kc2]: In this introduction, there is no information to what and where M1 is heading towards such as expanding its business through service innovation, adopting a focus strategy by enhancing their existing business standards and delivery, etc.

Comment [kc3]: Who said the political risk is relatively low? The student has obtained this credible information from the CPIB, thus the intext citation directing the reader to where this information or idea was obtained. This is also to acknowledge the author of the information/ idea.

Comment [kc4]: How government influence the Telecommunication industry through the legislative power, Infocomm Development Authority (IDA).

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regulations and guidelines (Info-communications Development Authority of

Singapore, 2015). Such a political situation has given global investors such as Axiata

the confidence to invest in M1 (Global Telecoms Insight, 2015). Large corporations

such as Google have also collaborated with M1 to introduce Asia’s wireless image

search for mobile phones. Thus political stability becomes a major factor which gives

M1 opportunities for global collaborations.

Economics

Singapore has established itself as a free-market economy and has flourished to a

first world economy in 50 years. This vast growth has resulted in median wages

increasing exponentially since 1965. The new median wage is among the highest in

Asia’s newly industrialised economies and ASEAN (Chew, 2015).

This increases spending power of consumers and the prospect of introducing

advanced services and products to serve both consumers and businesses in

Singapore. Such opportunities can yield higher profits for M1. In 2014, M1’s earnings

yielded its highest net profit to date and increase in customer base (Hio, 2015). This

is a result of higher educated workers and corruption-free government ensures

smooth flow of the business sector when coupled with one of the best legal and

financial sectors present here. This profit increase allows M1 to expand its consumer

base and operations.

While this may attract research and development and investors here, certain

constraints such as labour shortages and rising labour costs also exist (Chew, 2015).

Hence, the same increase in wages which gives consumers higher spending power

leading to higher profits for M1 may indeed have to be recycled back into paying

higher wages for workers.

Comment [kc5]: Based on your research, what could you infer and what could have happened currently and in near future.

Comment [kc6]: Student has provided a preliminary conclusion on the political factor, that is favourable to the chosen company, M1.

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Social – culture

Although an Asian country, the prevalence of social media has sparked an interest in

westernised culture among youths. People work hard to sustain good standard of

living and for materialistic aspirations. This is associated with increasing productivity

and GDP of the nation. Thus, businesses and investors can expect higher returns

with increased purchasing power from consumers. The graph below indicates

consumer spending in Singapore which increases steadily each year.

Singapore also boasts one of the highest literacy rates in the world. People here are

effectively fluent in English which motivates foreign investors to do business here.

These factors benefit M1 as it is able to attract investors from overseas. Also it can

invest further into Research and Development to cater to the increasing

sophistication of consumers. For example, the Iphone series and android phones

were introduced easily into the Singapore market as consumers were well-versed

about technology advancements. Thus it is conducive for companies like Google,

twitter, Yahoo who have offices here in Singapore and this provides M1 with

opportunities to collaborate with them.

Figure 1: Statistic of Singapore Consumer Spending

(Source: http://www.tradingeconomics.com/singapore/consumer-spending)

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Technology

Consumers here are able to enjoy sophisticated lifestyles due to the technological

advancements in place here. The internet, for instance, plays a major role in

Singapore’s development. Communication and information are shared readily across

the internet. Hence, headquarters, offices and employees are able to share and

exchange data real time to improve supply chain management. This is both time and

cost effective. Also an increase in social networking provides a platform for

consumers to share their opinions directly with businesses. These developments

give M1 the scope to conduct business operations effectively.

Singapore has been continually refining her IT infrastructure and aspires to become

a global IT hub (Boonraj, 2012). Consumers here can readily connect with 7500

wireless hotspots available across the island. As of 2015, about 4.3 million users

who are still on the 3G network plans with telecoms are expected to migrate to the

4G plans which already have about 3.5 million users (Tham et. al, 2015). A recent

survey conducted among popular shopping centres in Singapore capturing the

download and upload speeds across major telecoms present here revealed that M1

is competent but there is room for improvement, especially with download speeds at

underground levels.

Figure 2: Download and upload speeds of different telecoms in shopping centres

http://www.straitstimes.com/tech/4g-users-in-singapore-on-the-rise-but-indoor-coverage-still-found-wanting

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Though this may be a weakness for M1, it also presents opportunities for M1 to

upgrade new in-building technologies in high traffic buildings such as raffles place to

improve the speed gaps. With support from the government to expand on IT

infrastructure, M1 has more prospects in developing itself as a telecom.

Environment

The ministry of Environment and Anti-Pollution unit in Singapore ensures that

pollution levels are kept checked as global warming concerns increase. Situated

here, M1 has taken efforts to be environmentally friendly. As a telecom competing

fiercely with other rivals who provide similar services, this may project a positive

image of the brand to consumer.

M1 has already started scrapping printed brochures by adopting a paperless concept

in all of its stores; and replaced fluorescent lights with LED lights in their office

buildings to reduce electricity usage. Besides these, M1 could explore more ways to

protect the environment and boost its image among consumers (M1 Limited, 2013).

Legal

Singapore has maintained a fair and transparent law and order system since

independence. Both individuals and businesses are viewed equally under the law.

As mentioned above, the government has established institutions such as IDA to

govern various industries. IDA sets rules and guidelines such as the Postal Codes of

Practice and Notifications to ensure fair competition among telecoms. (Info-

communications Development Authority of Singapore, 2015).

However such guidelines may be harsh. One instance was M1 being fined a record

high of $1.5 million dollars for a 60 hour network outage as IDA considered the

incident to have a serious impact. It was noted that the improper maintenance of

electrical installations was the main reason behind the outage. Therefore having a

strict system may not always be beneficial. This has tainted M1’s image causing

consumers lose confidence in its services.

However, there are also prospects in a strict legal system such as free trade

agreements - ASEAN free trade area (AFTA) and Trans-Pacific SEP etc and anti-

dumping practices. Hence, when services and products are imported into the

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telecom industry, M1 can be assured that practices and prices will be fair (Singapore

Government, 2010).

Porter’s 5 forces

1) Threat of substitutes products: Low

The threat of substitutes within the telecom industry is rather low. When rivalries

introduce new advanced technologies, it is not difficult for a large firm such as M1 to

match up. However in this technological era, the Voice over Internet Protocol (VoIP),

such as WhatsApp seem like probable substitutes to regular voice and SMS

services. This becomes a threat to M1 as it would have to tailor its services and

research continuously such as providing advanced data service plans, which may

involve high costs of implementation so as to remain relevant (Ng, 2010).

2) Bargaining power of Buyers : High

Most telecom contracts last for about 2 years. With other major rivals such as

SingTel and StarHub providing similar products and services, consumers have a

choice to switch providers easily. Therefore the bargaining power of buyers is high

making it is crucial for to M1 retain customer loyalty with incentives and rewards.

3) Bargaining power of suppliers : Low

Most suppliers in the telecom industry supply tangible products such as mobile

phones and routers. There are many suppliers who mainly serve the three giant

telecom firms in Singapore. As such telecom firms are able to choose from large

pool of suppliers and switching costs remain low. Therefore suppliers are not able to

set prices and have moderately low bargaining power. Hence M1 would not be at

risk when a deal breaks as it has other viable options. This allows M1 to set prices

competitively to its rivals without additional costs from suppliers.

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4) Threat of new entrants : Low

The barrier to enter the telecom industry is rather high. Firms that choose to enter

the telecom industry need to attain license from the Telecommunications Authority of

Singapore (TAS) which sets stringent criteria to obtain a license. High capital and

infrastructure also needs to be injected into the firm else they may lose out on high

overheads in the long run. Therefore aggressive competition and high entry barriers

decrease the threat of new entrants. Thus, M1 can focus on competing with existing

rivals rather than new entrants.

5) Competitive rivalry within industry : Very High

M1’s rivals are namely StarHub and SingTel. The telecom industry in Singapore is

saturated with differentiation methods experimented by each player to stand out

among the homogeneous products and services they offer. This makes competition

within the industry very high. Hence, the industry is likely driven by differentiation

rather than pricing.

Therefore it is vital that M1 provides distinctive services to differ itself from

competitors, such as quick response time to customer enquiries and quality practices

to ensure smooth running of networks.

Issue Analysis

The telecommunication industry in Singapore has become saturated over the years.

Services such as M1’s lucrative trade of voice calling and short message service

(SMS) are gradually being substituted by VoIP services such as Skype, WhatsApp

and Viber. Moreover, the usage of mobile and fixed lines in Asia has been on a

decline and mobile broadband subscriptions have increased.

The new technology 4G LTE (Long-term Evolution) is a wireless high speed data

connection for data terminals and mobiles. From a consumer’s viewpoint, when the

internet is increasingly able to provide for services such as voice calls, messages

and more, the usage of telecom services decreases. Hence, there is demand to

provide data services of high speed connectivity. Moreover, consumers tend to view

all telecoms homogenously due to the similar services they provide. With bi-annual

Comment [kc7]: Based on the earlier research and analysis conducted on PESTEL and Porter’s 5 forces, the issue analysis serve as a collective conclusion to identify the key areas of concern which the company should be focussing. This will lead you to providing the relevant recommendations, known as your strategic recommendation.

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contracts and easy subscription switch, M1 and other telecoms face the threat of

losing customers.

Conclusion and Recommendation (Strategic Recommendation)

Without much difference between telecoms present here, M1 needs to revive its

position in the market with a unique differentiation position. M1 could widen its

service orientation from phone lines and broadband to continue being relevant in the

future.

VoIP service is an area that has decreased M1’s revenue. Hence M1 needs to stress

on data plan subscriptions for its users. With increasing VoIP services, boosting data

limits will convince users to retain their subscription with M1 and attract new

consumers.

However the government has also installed Wi-Fi spots around the country and

some users may choose to only utilise Wi-Fi connections. This is common when

consumers exceed their data limits for the month. Instead of prescribing larger data

plans, M1 could educate them on the data usages of various applications they

commonly use. Equipped with better knowledge the user will gain more confidence

when engaging M1’s services.

Another possibility to increase M1’s market share is to collaborate with big

applications such as Skype to promote usage of their services over M1 lines. Users

of VoIP services may sometimes experience network hiccups or disruptions. If M1

can provide flawless network connectivity for such applications, then it can retain

users while attracting new customers.

M1 can also engage and update their consumers by providing a one stop app. This

app keeps track of their loyalty points and provides on-the-go solutions for

consumers facing network related problems. This would save time for consumers

who would need to call the customer service centre and wait for a long time before

resolving their issue. The app should be able to update the status of the issue once

the consumer inputs a request or question. Updates such as “pending or completed”

gives customers the benefit of knowing that the problem is definitely resolved instead

Comment [kc8]: Based on your issue analysis, you shall provide an appropriate solution(s) to tackle the highlighted issue(s).

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of taking the customer service officer’s words at face value which at times escalates

into a butterfly effect.

In conclusion, there are ways for M1 to adapt and differentiate itself from its rivals. It

is about gaining the trust and loyalty of existing consumers, which in turn becomes a

word-of-mouth promotion of their excellent services that other users will want to

subscribe.