Telecommunications giant TPG Telecom Ltd (ASX: TPM) made a name for itself by being a low-cost broadband alternative to industry leader Telstra Corporation Ltd (ASX: TLS). But is the disruptor now at risk of being disrupted itself?
Fledgling telco Amaysim Australia Ltd (ASX: AYS) recently completed the acquisition of Australian Broadband Services. The acquisition provides Amaysim with the subscriber management technology it needs to simplify the complex process of setting up broadband connections.
As well as this management believes it puts it in a position to capitalise on what it sees as a critical churn event when the existing network is switched off and replaced by NBN.
But what are the chances of Amaysim stealing market share from the big boys? According to research by Roy Morgan the chances are higher than you might expect, especially with TPG Telecom.
It estimates that around 23% of Amaysim's mobile subscribers have fixed broadband with TPG Telecom. A further 13% are estimated to be with Telstra, another 13% with Optus, 6% with Vocus Communications Limited (ASX: VOC), while 12% are with unknown providers. The final 26% are estimated to have no fixed broadband connection.
The 26% of its subscribers that don't have fixed broadband connections would be an obvious target. But I would have to agree with Roy Morgan in the view that if the these subscribers don't have an internet connection now, there's no guarantee that they will have any interest in having one in the future.
Its subscribers with fixed broadband provided by TPG Telecom are likely to be the main target according to Roy Morgan. Its research shows that over half of TPG's broadband customers chose the provider for its cheaper rates.
If Amaysim is able to undercut TPG Telecom, then I would have to agree that there is a reasonable chance that it could convince these subscribers into switching over and bundling their services.
Whilst I agree with Roy Morgan's view, I wouldn't be too concerned at this stage if I were a TPG Telecom shareholder. It certainly won't give up these subscribers without a fight and could itself fight back by targeting the very same customers with its own bundles.
