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To: ms.smartest.person who wrote (916)	4/2/2001 4:12:48 AM
From: ms.smartest.person	Read Replies (1) of 2248

2001-03-29 Collapse In Asian 3G Licence Costs To benefit Investors Independent Economics Research & Consulting Summary The announcement that four companies have submitted applications to pre qualify for Singapore's auction of third generation (3G) mobile phone licences, creates the real possibility that the licences will be allocated at the minimum bid price of S$100mn/US$56mn each. Such an out turn would stand in contrast to the feeding frenzy in Europe at this time last year which witnessed the British and German governments raise US$83bn through the sale of 3G licences. The big picture The possibility that the infocom development agency (IDA) in Singapore will have to allocate licences for the minimum bid price of S$100mn will be of significant benefit shareholders in the four companies that win licences. Nevertheless it should be noted that on a per head of population (PoP) basis the Singaporean licences are priced at a 75% premium to those recently allocated to telecom companies in Australia. Given the similar levels of mobile phone penetration and average revenue per user in both Singapore and Australia, the difference in PoP is difficult to justify (note Australian 3G licence are not national licences as is the case in Singapore). While these pricing anomalies have also been witnessed in Europe where the PoP varied from US$615 in Britain to US$94 in Austria, the key issue is timing. The Austrian 3G auction took place considerably later than the British auction, after sentiment had already started to deteriorate. In the case of Singapore and Australia, the regulators finalised plans for the licence sale on practically the same day and the auctions are scheduled to take place within one month of each other. In light of this it is likely that as was the case in Australia, the Singaporean licences will not sell for much more than the minimum reserve prices, with a real possibility that they will be sold at the reserve price. Despite the sharp falls in the share prices of Asian telecom companies investors should note that as sentiment stabilises towards the global telecom sector, Asian companies are likely to outperform global peers on the rebound. This is related to the sharply lower cost of 3G licences in Asia relative to Europe (US allocation of 3G licences is not expected until '02). Nevertheless, this is unlikely to be of comfort to investors who have seen the value of their shareholding in companies that once enjoyed monopoly status sink to record lows. Investment implications With four companies competing for the four 3G licences on offer in Singapore there is a real possibility that the infocom development agency in Singapore will have to allocate licences for the minimum bid price of S$100mn/US$56mn. Such an outcome would be of significant benefit to shareholders in the four companies that win licences. Nevertheless, it should be noted that on a per head of population (PoP) basis the Singaporean licences are priced at a 75% premium to those recently allocated to telecom companies in Australia, despite similar mobile phone penetration rates in both countries. quamnet.com

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