S'pore to auction remaining 3G spectrum

Singapore government pushes on with proposed auction for country's fourth 3G license, despite opposition from existing telcos, citing need to ensure efficient use of scarce spectrum.
Written by Tyler Thia, Contributor

SINGAPORE--The country may see a fourth 3G telco in the market by the end of the year, following the government's decision to auction unused 3G spectrum.

Local ICT regulator, the Infocomm Development Authority of Singapore (IDA), in March called for public consultation on its plans to put up for sale three lots of spectrum left unutilized after the country's 3G auction in 2001 ended with only three winning bids, instead of the targeted four.

The proposed auction for a fourth 3G telco has met with strong opposition from the three local telcos--SingTel, M1 and StarHub--which cited reasons such as the lack of demand as shown in the previous auction, and the large amount of investment the existing operators have already put in to develop 3G capabilities. Hence, they argued, they should be allocated the remaining lots to further facilitate growth in demand.

The three telcos also cautioned that consumers may eventually have to bear higher prices which will be driven up by the auction.

In the 2001 auction, three lots of spectrum were assigned to the operators at S$100 million (US$72.8 million) each.

In response to the objections, IDA noted that even if the remaining 3G lots were to be redistributed between the existing market players, there is no guarantee prices will be kept low as telcos typically peg their services according to market rates.

"The operators are likely to charge end-users a price they think the market can bear, independent of the cost of the 3G spectrum lots," it explained, adding that the one-time payment for the spectrum will likely be regarded by operators as "sunk cost" and unlikely to be passed on to consumers.

Also, IDA noted that the current operators already have substantial amount of spectrum so there is no need to extend priority to them.

Efficient use of scarce spectrum
The Singapore government will proceed to invite interested bidders a chance to enter the local market, IDA said, and the new player will be able to offer full 3G services to compete head-on with the three existing licensees.

Defending its decision to push through with the auction, it said: "IDA's policy objective is to ensure efficient and optimal use of our scarce spectrum resource. In making available the remaining spectrum...IDA seeks to ensure the spectrum is allocated in a way which makes the most efficient use of this scarce resource to promote innovation in, and growth of a vibrant infocomm industry in Singapore."

According to IDA, 3G subscriptions grew by over 25 percent between September 2008 and September 2009. HSPA or 3.5G subscriptions also climbed by 240 percent, it added.

Bidding rules for the auction will be finalized by the end of this month, after which IDA will invite interested parties to submit an application. An auction, if necessary, will be held between September and October and the successful licensee will be announced by November.

Touching on the reserve price, IDA said the business case for 3G is more established today compared to 2001 and the capital expenditure for network rollout is also lower. "It is therefore not unreasonable to price the spectrum at S$100 million, with relevant discounting today," it said.

It added that it will set the reserve price at S$20 million (US$14.6 million) for each lot of 3G spectrum, excluding one-time application and processing fee of S$5,300 (US$3,856) per spectrum lot. The winning bidder will not need to pay annual license fees to provide 3G services.

Across the region, India recently concluded its own 3G auction that generated US$14.6 billion for the local government.

The Philippines in March also commenced its auction for the country's fifth and final 3G license, amid objections from existing market players. The exercise has since escalated into a scuffle between competing telcos, some of which have brought their fight to the courtroom.

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