Singapore Telecommunications Limited, commonly known as Singtel, is a Singaporean telecommunications conglomerate. The company was established as an Oriental Telephone and Electric Company in 1883. On 1 April 1992, Singtel was corporatized in preparation for its public listing and impending competition in the telecoms sector (Singtel, 2021). It operates through the following segments: Group Consumer, Group Enterprise, Group Digital Life, and Corporate. Singtel has expanded its business outside its home market and owns a business in many regional operators, including full ownership of Australia’s telco Optus and Bharti Airtel in India. Porter’s five forces analysis is a valuable tool to assess the business and financial risk Singtel is exposed to in the global telecommunication sector.
Competitive Rivalry in the Market
The competition in the industry depends on some key factors. It includes the size of competitors and industry saturation. The number of competitors is essential as all the telecommunication firms in the sector share the same market. The size of the network and coverage determines the size of market share. In the telecommunications sector, all aspects of rivalry, including price discounting, introducing new products, service improvements, and advertising campaigns, play an essential role. (Nikbin et al., 2012). The scale of the company plays a vital part in its ability to pressure its rivals. There are only four major companies in Singapore, including Singtel, M1, Starhub, and TGP Telecom. It is an indication that the concentration in the mobile operator sector is low. In 2018, Singtel had a share of 53.7% compared to Starhub’s 27% in the mobile market based on revenue (Statista, 2021). Therefore, the competition level is low.
Threat of Substitutes
The substitute is a product offered that offers the same service as the firm’s product. The availability of better alternative products is moderate. The threat is increased when there is a low switching cost, and better alternatives are also widely accepted. The telecommunication industry is revolutionized in the last two decades. Information and Communication Technology (ICT) services became cheaper, the price of high-speed internet, and mobile cellular services dropped, a transformation that has brought great benefit to consumers (Parkers & Teltscher, 2011). The industry is incorporating with the financial sector to explore new products and increase clientele. Singtel is expanding its business and already established its cybersecurity firm Trustwave and data-driven marketing company Amobee (Singtel, 2021). The company has established a venture fund to fund innovative startups. The company is evolving and adding a new market domain to keep itself ahead in the market. Therefore, the threat of substitution is moderate.
The Threat of New Entrants
The threat of new entrants is assessed to be low. The threat of new entrants into an industry is related to entry barriers within the industry and geographic boundaries. (E. Dobbs, 2018). The problems are inherent to the industry, and one major problem is regulation and initial capital requirement. To cover fixed operating costs, startups need a massive amount of cash. Singtel has a huge capital base and has more than 4.3 m consumers in Singapore (Singtel, 2020). It makes the company position to change transmission systems and frequently upgrade to the detriment of competitors. Considering the factors mentioned above, the threat of new players breaking into the sphere is low.
Bargaining Power of Buyers
The bargaining power of the buyers depends upon the nature of the industry and the value buyers it brings. Other factors that affect buyers’ power are buyers’ concentration, switching cost, and available substitutes. The buyers of telecommunication products are individuals and corporates. The most influential factors in their decision-making are price sensitivity and the perceived quality of service (Kim et al., 2011). Price sensitivity is a function of the overall buying behavior of buyers in the market, the income of the buyers, and the value that is accorded by these buyers to the products and services offered by the participants in the telecommunications industry. The individual buyer has a restricted purchasing power as compared to corporate buyers. Therefore, overall the bargaining power of buyers is low.
Bargaining Power of Suppliers
The bargaining power of suppliers consists of the state of the Industry and underlying factors.In the industry, suppliers usually have moderate to low bargaining power. The power of suppliers in the telecommunications industry in the world is affected by two key elements: the power of the Network Equipment Providers (NEPs) and the power of the workforce, or suppliers of labor. Suppliers assert higher power if they are in concentration, compromising product quality (Steven et al., 2018). NEP is the provider of service to the telecommunication industry. NEP depends on these companies to generate revenue by providing support for operating a network. The workforce suppliers are the second element; it is affected by the availability of a qualified and experienced telecommunications sector workforce and the consolidation in the regional labor market in the telecommunications sector. Therefore, suppliers have low bargaining power.
References
E. Dobbs, M. (2014). Guidelines for applying Porter’s five forces framework: a set of industry analysis templates. Available at: Competitiveness Review, 24(1), 32-45
Kim, K. K., Ryoo, S. Y., & Jung, M. D. (2011). Inter-organizational information systems visibility in buyer–supplier relationships: the case of telecommunication equipment component manufacturing industry. Available at: Omega, 39(6), 667-676
Nikbin, D., Ismail, I., Marimuthu, M., & Armesh, H. (2012). Perceived justice in service recovery and switching intention. Available at: Evidence from Malaysian mobile telecommunication industry. Management Research Review, 35(3/4), 309-325.
Parkes, S., & Teltscher, S. (2011). ITU sees 5 billion mobile subscriptions globally in 2010. ITU International Telecommunication Union [Online]. Available at: www.itu.int/newsroom/press_releases/2010/06.html.
Singtel. (2020). Investor factsheet March 2020. Available at: https://www.singtel.com/content/dam/singtel/investorRelations/factsheetsAndPresentation/2019/Q4FY20_Factsheet_Final.pdf
Singtel. (2021). Our Heritage. Available at: https://www.singtel.com/about-us/company/heritage
Singtel. (2021). Strategic Portfolio. Available at: https://www.singtel.com/about-us/company/strategic-portfolio
Statista. (2021). Share of the mobile revenue market in Singapore as of 2018, by operator. Available at: https://www.statista.com/statistics/1007915/singapore-mobile-revenue-market-share/
Steven, A. B., Dong, Y., & Corsi, T. (2014). Global sourcing and quality recalls: An empirical study of outsourcing-supplier concentration-product recalls linkages. Journal of Operations Management, 32(5), 241-253.