Published June 15, 2009

What lies behind SingTel's latest music foray?

By WINSTON CHAI

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THE problem with chasing a runaway hit is that you will always be seen as playing catch-up. In this light, SingTel's latest music foray will undoubtedly draw comparisons with Apple's vastly popular iTunes store and be viewed as yet another wannabe giant-slayer.

Top billing: US singer Lady Gaga at the launch of SingTel's Amped music service yesterday. The prospect of free unlimited music downloads gives more reason to 'see red'

However, if you look behind yesterday's glitzy launch and the marketing rhetoric, it's not difficult to discern SingTel's true intent behind its new business venture.

For the near term, at least, the company's new Amped music portal is less about uncovering a new revenue stream but more about cementing its longer term mobile dominance.

All three telcos saw a weakness in their local mobile earnings in the first quarter as consumers kept within their subscription bundles and avoided making long-distance calls.

M1 lost 11,000 mobile subscribers during the first quarter and the exodus pulled its market share down to 25.4 per cent. StarHub's mobile revenue dipped 3.1 per cent to $264.7 million in the same period.

SingTel managed to eke out a 9.1 per cent gain in mobile revenue during the period because it managed to add 34,000 new customers and coax more of them to go for mobile data and higher-value bundles.

As it stands, Singapore's mobile penetration rate is already at 133.2 per cent and this translates to 6.45 million cellular subscriptions in a country with a population of only 4.5 million.

Simply put, there simply isn't much room left for telcos to grow their local subscriber count substantially in the coming years.

Against this backdrop, sustainability will rest upon getting current customers to use more services, or snagging all the new subscribers and defectors you can get your hands on.

SingTel's online music foray seems squarely aimed at addressing the latter.

As a free service offered alongside selected mobile plans, it is clear that the new Amped service is not meant to be a revenue-generating platform. Add Universal Music into the mix and the revenue-sharing pact makes it even less attractive from a sales and margin perspective.

However, the prospect of free unlimited music downloads does give kids, teenagers and young adults who are accustomed to all things Internet an additional reason to 'see red'. This user group represents the future of mobile consumption in Singapore and SingTel is clearly trying to start them early.

As with SingTel's exclusive iPhone arrangement, the Amped service also gives consumers an additional reason to consider defecting under Singapore's new number portability regime.

With voice being the lowest common denominator among the telcos, a free musical buffet could prove to be the thin line separating a customer gain from a loss.

For record labels such as Universal, striking such pacts with telcos also cuts them in on revenue they would have otherwise lost to piracy. The International Federation of the Phonographic Industry estimates that 95 per cent of online music downloads from the Internet last year were pirated.

Both SingTel and Universal could be seeding users for the future by getting them used to legal downloads now. If the piracy scourge is eventually reduced with stricter enforcement, it will undoubtedly drive more users to seek out legitimate alternatives, a win-win situation then for both the record label and the red camp.

In the game of business, one must think ahead to stay ahead. In this respect, Singapore's once-lumbering telecommunications giant is now showing signs that it is becoming more nimble by the day.