TELECOM & INTERNET | Marianne Estioco, Singapore

Fourth telco hopefuls face cut-throat battle as spectrum auction draws closer

Experts aren’t too bullish on a new operator.

A taxing uphill battle is ahead for fiber broadband provider MyRepublic and Consistel, two companies which are currently gearing up to be Singapore’s newest mobile network operator.

Analysts caution that although the fourth telco hopefuls have aggressively broadcasted theur plans to be Singapore’s fourth operator, the contenders face several roadblocks before it can go head-to-head with the entrenched incumbent operators.

For instance, intensifying competition in the saturated mobile market will be a key stumbling block for the new entrant, as a new player will have to roll out its own infrastructure before it can fully deploy its network.

“Unlike the IDA’s previous move to open up the broadband market, the basic infrastructure is not built by the government. In this instance, it may need to use an incumbent’s network to provide wider coverage. And because the IDA does not regulate wholesale prices, the new entrant may suffer a cost disadvantage in the first few years,” said Carey Wong, equity analyst at OCBC Investment Research.

Wong added that the new entrant might need to spend as much as $700 million to have a fully operational network, particularly because of the densely built-up area in Singapore.
“The new entrant may still need several more rounds of funding to secure its roll-out capex as well as pay for spectrum fees; but in the current uncertain economic environment, it could be tough to raise funds,” Wong noted.

In recent weeks, incumbent telco operators aggressively lowered their mobile pricing after MyRepublic unveiled the mobile plans that it will offer should it be granted a licence. Wei Shi Wu, analyst at BNP Paribas, noted that the incumbents’ swift response shows the depth of competition that a contender will be up against. 

“The incumbent’s pricing response was significantly faster than we had expected given we are still a few months away from any certainty around the new entrant. In our view, this is a strong demonstration of the incumbents’ willingness to raise the barriers for operators looking to enter the market,” Wu noted.

She added that the aggressive pricing change could encourage re-contracting in the coming months, which would lock subscribers into two-year contracts.
“Crucially, this could shrink the addressable market for a new operator looking to launch services end-2017/early-2018,” she warned.

The IDA plans to hold the New Entrant Spectrum Auction by the third quarter of 2016, while the General Spectrum Auction will be held in the fourth quarter. The deadline for key contenders MyRepublic and ConsisTel to provide expression of interest is by mid-2016.

In the event that a fourth telco successfully breaks into Singapore's mobile market, analysts note that M1 will be the most negatively impacted as it derives 80.5% of
service revenue from its domestic mobile business.




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