Warburg-backed Circles.Life wins slice of telco pie, targeting incumbents’ legacy systems

Rameez Ansar, Co-founder & Director, Circles.Life

Circles.Life has been taking a slice of telco markets in Singapore, Australia and Taiwan – and picking up big-name funders along the way – with a cloud-based platform that connects customers and towers more efficiently than the incumbent mobile network operators.

The company is a mobile virtual network operator (MVNO), which means it leases wireless capacity from a mobile network operator (MNO) at a discount and resells it to consumers.

Within Singapore’s tightly contested and saturated telco market, Circles.Life has managed to carve out a 5 percent market share. Within the last six months, it ventured into both the Taiwanese and Australian markets.

Rameez Ansar, co-founder of Circles.Life, told DealStreetAsia last week the “secret sauce” was developing more efficient “middleware” – or the technology between the telco towers and customers’ smartphones – and turning it into a cloud-based platform called Circles X.

The platform leapfrogs MNOs’ hodgepodge of legacy systems, which may not always be fully integrated, Ansar said. He called the process taking “out the entire guts” and rebuilding it.

The platform only takes “weeks” to launch in a new market, with far lower costs, Ansar added.

At the same time, the company offers consumer plans which ignore industry precedent: There are no contracts and phone purchases are separate from service offerings.

The business model has attracted keen interest from investors, including a “substantial investment” from global private equity major Warburg Pincus in a Series D round, announced on Feb. 11.  While the company has declined to provide details of the investment, co-founder Abhishek Gupta said in a recent interview on Bloomberg TV that the amount raised could be in the “hundreds of millions.”

Last year, Circles.Life had raised two rounds of funding. In June 2019, the digital mobile operator had raised an undisclosed amount in a funding round led by Singapore government-linked investor EDBI and Silicon Valley-based Founders Fund. In January 2019, the firm also had raised an undisclosed Series C round from Sequoia India.

Ansar said the latest funding raised from Warburg Pincus was a “clean” round, meaning it won’t be used to repay previous investors. He added most of the company’s backers want to remain invested, though he said an IPO was “on the radar” in the next few years.

Growth in markets, verticals

According to Ansar, there will be three spending priorities for the newly raised funding: Firstly, for Circles to continue expanding in its three markets; to build out its leadership base; and to expand the non-telco product offerings.

The non-telco offerings include a tie-up with event ticketing service Sistic, which uses AI to recommend events to users of Cirles.Life’s app, and a daily “polling game.” The game asks users about their preferences on topics ranging from fast food to movies to how many pockets a pair of pants should have.

Ansar said the contribution from non-telco sources was relatively small so far.

When it comes to growth in telco services, Ansar pointed to the revenue potential from just small slices of the market. Overall telco revenue in Singapore is at around $4 billion to $5 billion, while Taiwan has an $8-billion telco market and Australia has an $11-billion one, he said.

“Five percent of that means a lot of money,” he said. He added that Circles.Life was targeting eventually taking 20 per cent of Singapore’s market.

In 2019, Taiwan had around 29.5 million mobile subscriptions, Australia had 31.6 million and Singapore had 8.4 million, according to data cited by a report Thursday by S&P Global Market Intelligence.

Ansar said he expected the Australia and Taiwan markets to be profitable once 1-2 per cent of the market is reached. Currently, Circles.Life has less than 1 per cent of those markets, but the company is targeting 5 per cent of those markets within 18 months, he said.

Ansar also said Circles.Life was looking to enter new markets.

Not a price war 

To be sure, the average revenue per user (ARPU) for Singapore’s telcos is likely to continue to fall over the next couple of years as more customers switch to SIM-only plans. Such plans, which tend to be cheaper, have been adopted by only around 20-25 per cent of post-paid users currently, DBS Group analysts said in a report in January. DBS noted Singtel, the city-state’s largest telco, is offering a 20GB SIM-only plan for S$20, compared with its post-paid ARPU of S$38.

Competition within Singapore remains fluid, with another MVNO, Zero Mobile, discontinuing its unlimited data plans in December 2019, just two years after rollout in the city-state. In fact, Zero Mobile had urged its customers to switch to other telco providers to keep from losing service. The MVNO said it was still planning to operate within the city-state, but doesn’t appear to have released a new offering to customers yet.

Zero Mobile said as much as 30 per cent of its revenue from customers went uncollected and pointed to several individuals who abused the unlimited data plans by using more than 600GB in a month and then defaulting on their accounts.

The DBS report noted that out of the 10 players in Singapore’s market, including six MVNOs, only Circles.Life seemed to be doing well. The analysts posited that some MVNOs in Singapore would face funding shortfalls this year due to unsustainable business models.

Circles.Life, however, may sidestep the consumer credit concerns that hit players such as Zero Mobile.

Ansar said Circles.Life is targeting digitally savvy, white-collar customers, often with monthly incomes at or above S$10,000. Singapore’s median monthly income is around S$4,500, according to the Ministry of Manpower. The company’s website also indicates it may require deposits from some customers.

Circles.Life’s ARPU was around S$40 a month, but that excludes equipment purchases, Ansar said, adding the average customer uses around 12GB of data a month. The company’s primary plan is S$18 a month, which includes 20GB of data. It targets the retail consumer market and isn’t chasing the corporate market.

As Ansar put it, Circles.Life’s business model is different.

“If somebody comes in with a traditional MVNO game of pricing and focusing on a particular segment, it doesn’t usually last long. And we’ve seen this in the UK, we’ve seen it in Australia, we’ve seen it in multiple markets,” he explained. “We haven’t seen anything yet that is fundamentally competing on the customer experience. Mostly, the competition is in price. But that’s not a sustainable strategy for anyone. And that is not the competition we worry about. We worry about the competition from the likes of Google Fi.”

Similar to Circles.Life, Google Fi offers no-contract mobile and data service, including no additional charges for international roaming, but full use of the service requires a specific phone purchased from the company. It’s currently only available to U.S. customers.

Ansar also pointed out that a large proportion of telco customers in Circles.Life’s markets were locked into contracts, with 70 per cent of sales in Singapore on contracts, 60 per cent in Australia and upwards of 70 per cent in Taiwan.

Unfortunately, the company’s marketing efforts to get potential customers to break their contracts have had mixed results. A crowdfunding campaign in Singapore to pay for breaking contracts raised around S$50,000 from online and offline sources, well below its S$1-million goal.

Still, Ansar added that data had also showed increased competition in Singapore appeared to help with acquiring new customers as it creates more awareness of alternative telco options.

“Now people consider changing, which they wouldn’t have before. Also, the same thing in Australia, we’ve seen our uptick to be great, and quite strong,” Ansar said. “Australia has tons of competition in terms of at least brand new telcos.”

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.