Are telco tie-ups the way to stay ahead?

"IF you can't beat them, join them."

For telco players in a highly competitive sector, this might now be less trite adage than new motto, as incumbents team up with would-be "disruptors" to stay afloat in a dog-eats-dog space.

The joint Singtel-Razer payments system and StarHub's debut network leasing deal with MyRepublic, both announced last week, are recent signs of the effort to keep a grip on a lucrative but crowded consumer market.

Both arrangements will see telcos pairing up with companies playing in the same arena. Singtel and Razer want fingers in the electronic payments pie, while StarHub and MyRepublic lick their chops at the mobile consumer market.

Surely, to make partners out of rivals must point to an evolving strategy on the part of the big boys.

There is nothing novel, at this juncture, in pointing out that competition is intense in Singapore's telco industry. Consumer options run the gamut, from the three listed players to a slew of mobile virtual network operators (MVNOs) that cater to niche segments. And TPG Telecom will come muscling in soon enough.

In accordance with the laws of supply and demand, telcos have had little choice but to offer fickle customers more and more perks - such as service bundles and large data allowances - at lower and lower prices.

Average revenue per user (ARPU), long a telco holy grail, has ticked downwards in the mobile consumer segment, according to both M1 and StarHub's first-quarter results for the three months to March 31. Singtel is set to release its earnings next week.

StarHub's latest group performance review also showed that mobile service revenue - the biggest chunk of its turnover - has been slipping year on year, both as a share of overall revenue and in the absolute amount of loot hauled in.

Amid this gloom, it is no wonder that the fine distinction between competition and complementarity was on everyone's lips on StarHub's earnings call last Thursday. In other words: When inking such tie-ups, how can an incumbent grow its market footprint, instead of having it eroded?

Chief marketing officer Howie Lau stressed that MyRepublic's go-to market strategy is "very complemetary to ours", adding that his company's plan "is to grow overall mobile business".

BMI Research analyst Kenny Liew was upbeat on the tie-up, saying: "MVNOs generally target lower-end consumers who are price-conscious, and these are the consumers that the operators are usually willing to lose."

Still, market watchers have asked for more clarity on which consumer segments fibre broadband company MyRepublic - which harbours its own public listing ambitions - will aim for. Its managing director, Yap Yong Teck, would only share that the company plans to focus on "Singapore's younger, more tech-savvy crowd".

OCBC Investment Research's Eugene Chua wrote that MyRepublic's offerings "need to be complementary rather than overlapping in order for StarHub to benefit". But if done right, the gamble could pay off, he added. In such a case, "having MyRepublic as StarHub's MVNO will help support its post-paid subscriber base and mitigate against significant market share loss upon TPG's entry".

The stakes are somewhat different in the Singtel-Razer arrangement, since digital payments is not - yet - a core business for either telco Singtel or gaming tech company Razer.

Critically, the pay-off may lie in the diversity of their operations. Singtel is banking on its associates' mobile wallets in South-east Asia - by and large, an emerging market. Meanwhile, Razer sells sleek products to an affluent audience, although it is working to expand its regional reach through the buyout of Malaysia-based payments firm MOL Global.

Arthur Lang, the chief executive of Singtel's international group, is fond of talking about "hunting as a pack". In a fragmented payments market that teems with ride-hailing firms and Chinese chat apps, Singtel may hope that the varied character of its and Razer's customers will lend the partners an edge in picking off the herd.

Now, with telcos searching frantically for new legs to stand on, only time will tell whether the enemy of an enemy is truly a friend.