Telecom Asia: What have been the highlights of the past 12 months?

Lucas Chow: The market is continuing to grow, and that's the good news. The bad news is the growth is significantly less compared with previous years. I think it's really reflective of the high penetration rate of the market, and [that we are] also getting into a very mature market scenario.

The market is also affected by the late arrival of the GPRS phones. We didn't really get GPRS phones until the fourth quarter, which was really doom and gloom following the September 11th incident And at the same time that's when the new phones were coming in, so we started to see a challenge.

But I think SingTel Mobile as a company has done credibly well, in terms of our financial performance as well as our trading numbers. For the first time since competition started in 1997 we have hung on to our market share in postpaid. We did not concede any more, and in that I am very pleased.

Overall we have grown on a year-on-year basis, despite the fact that we did a big clean-up exercise towards the end of last year where we cleaned out all of the inactive prepaid subscribers. All of those subscribers who we terminated and removed from the network all had a balance sitting with us.

What's the expiry period for prepaid subscribers?

We give validity for six months, and in six months the users must do a recharge or at least one top-up.

I should comment on the new activities. We have seen some good take-up rate on GPRS. I think it is not necessarily meeting our expectations. We would have hoped that there would be more users to come on with GPRS. The usage rate today is still not as good as what I would have hoped.

The good news about GPRS is that people are coming into the shops and starting to swap non-GPRS phones for GPRS phones. There must be more than 100,000 users or registered to use GPRS. The not-so-good figure is the usage. We have made it very easy to turn on the GPRS and do the configuration.

The user can walk out of the shop and start to use GPRS. Right now the bulk of the usage is information, downloads and then emails.

Going into the future--if I look at the next 12 months, I think we can continue to expect the growth of the penetration rate. I think our expectation is the market penetration will slow down. This is normal.

We are also of the opinion--if you look at SMS, GPRS, WAP applications, i-mode, sha-mail--that it is not really technology that drives usage, it is really applications and customer benefit.

But if you look at how Japan starts to launch 3G, it is behind DoCoMO's expectations. In the next 12 months, we will focus on launching applications and services as a prelude to 3G--to try to educate the market, to try to bring benefit to the customers, to try to drive up the usage--that would be our focus for the next 12 months.

Isn't that the problem with GPRS, that it's a technology without a clear, definable customer benefit.

First and foremost, GPRS terminals were late in the market. The second issue is also the speed. As a network, the infrastructure provider promises it will go up to 115 kbps, but the terminals today will hardly go beyond 1x or 2x or 9.6 kbps. But then we are limited by the capability of the terminal.

If you look at any of the 3G deployments, the spectrum, the infrastructure, they will promise you everything.

So I think GPRS is no different. At the moment, the speed of GPRS can be a lot better. There are companies doing accelerators that primarily can give you a 2X or 10x improvement for certain applications.

Even today, if you look at MMS, not all the terminals will be able to give you the size of the picture you have taken. The moment you cross different brands of terminal you may have a problem.

So I think the GSM world will really have to work very hard on these issues. In my mind the concepts, the applications, are all there, the operators are more than ready to support those services.

How do you rate the progress of Virgin Mobile, your MVNO partnership with Virgin?

I think we need to take a look at the entire mobile industry. Since we started the negotiation and the work with Virgin two years ago, the market has actually changed quite a bit. If you just look at the Singapore market, the penetration rate has grown quite a bit. There are many factors in the market that have affected the performance. In general, our view is that the Virgin Mobile launch in Singapore is actually behind our expectations.

Is there a basic problem with an MVNO in that it is taking a wholesale price and it is hard to be competitive on price?

I don't think that is the key issue. I think when a particular company is performing behind expectations there are multiple issues--there are operational issues, there are marketing issues, etcetera. I would not pin it on the MVNO model in particular, that you take a wholesale price and cannot make a profit or decent business out of it. If that is the case then we would not have gone into this particular joint venture anyway.

How about your plans to expand the MVNO business to other locations in Asia? Is that still on track?

I do not want to comment too much on that at the moment. I will reserve my comment until the board has made a decision.

Leaving aside MVNOs, as a mobile operator, you have expanded to all of your neighboring countries. How do you rate the progress in knitting these together?

If you look at the six companies working as a team, I am very pleased to report we have made tremendous progress over the last 12 months. Combined together, we are adding about a million subscribers net every month. It's about 23 subscribers every minute--and this is net, gross would be a higher number.

The majority of the growth is coming from Thailand and the Philippines. We see very good growth in India, Indonesia, we even see some growth numbers from Singapore and Australia.

In April or May we held the Asia Mobile CEO Forum in Phuket, and six companies again got together--I think this was the third round. We took the opportunity to review the progress we have made.

We have divided into three major tracks. One was network and infrastructure. As a group I think we continued to enjoy the most competitive capex in the market--because of the combined purchase volume. Another track is product and service development. Between SingTel and Optus, we are already aligning our product development effort so that we do not duplicate our effort.

We are also helping the associates launch some of the services that are successful in Singapore. For example, local direct dial is one that we are going out there to help our partners with.

The last track is in the area of SIM card and handset procurement. Because of the high growth that we are experiencing in the region, we are starting to put in a joint tender for SIM cards, and we believe that we definitely are getting a price that is among the world's best.

In terms of tangibles, we continue to see savings in terms of capex and opex dollars. In terms of intangibles, there's a lot of sharing of experience, marketing experience and successful marketing programs [and] churn management programs.

On capex, are you sharing suppliers already among the networks?

In most of the networks there is already an inherent supplier. And we will continue to work with those guys. We have been successful as a group of companies in being able negotiate with all these major infrastructure suppliers on the business incentives as well as discounts to help each one of the companies to drive the capex down.

This is extremely important for two reasons. First, for those companies with high growth, capex is one of the first things that you consider. Secondly, at some point in time, when the penetration rate in these countries gets very high, you will also get into lower ARPU subscribers, and getting a cost-effective infrastructure is very important. A case in point is Globe in the Philippines. Everyone knows it is a predominantly prepaid market with a lower ARPU, and therefore getting cost-effective infrastructure is absolutely critical.

The IDA recently concluded a consultation on infrastructure sharing, finally deciding against it. Do you believe that sharing networks could help reduce capex?

First of all, to answer the question, yes, I believe that infrastructure sharing will lower the capex of the operators. That is why in the 2G environment there is infrastructure sharing on a case-by-case basis, such as in certain tunnels and the underground, and that actually helps us drive the capex down.

Singapore geographically is a small metropolitan city-state. All said, if we can identify areas that it makes sense to share the infrastructure, then it will help us to reduce the capex.

But Singtel was opposed to the idea of infrastructure sharing--wouldn't it help reduce your capex?