Singapore Telecommunications to Bid for Six
3G Network Licenses in Asia
By Linus Chua
Singapore, Oct. 9 (Bloomberg) -- Singapore Telecommunications
Ltd., Southeast Asia's biggest cellular operator, plans to bid for
licenses to offer high-speed Internet access in six Asian markets to
stay ahead of rivals in the region's mobile phone industry.
Singapore's biggest publicly traded company, which has $3.5 billion
in cash for expansion, said it will team up with other firms to bid for
licenses for 3G, or third-generation cell phone services, in Taiwan,
Malaysia, Indonesia, China, Hong Kong and Australia as competition
heats up at home. In Hong Kong, the company is talking to potential
partners, including New World Development Co.'s mobile phone unit.
``SingTel is by far the mobile operator with the most regionalized
network in Asia now; 3G licensing will be a catalyst for'' keeping that
lead, said Steven Wong, an analyst at ABN Amro Securities Ltd. in
Singapore.
The company's moves will pit it against Hong Kong's Pacific Century
CyberWorks Ltd., which with Australia's Telstra Corp., is creating a
similar regional network. SingTel will also be taking on global
operators such as Vodafone Group Plc and British
Telecommunications Plc that are aggressively pushing into Asia's
cellular market.
SingTel, like other former phone monopolies, is eyeing foreign
markets to broaden its revenue base as rivals eat into business at
home. Singapore opened its phone industry in April.
``We have ambitions of becoming the regional leader in the wireless
communications world,'' Lucas Chow, chief executive of SingTel's
mobile unit, said at a news briefing. ``At the end of the day, size is
everything.''
Regional Assets
Its biggest cellular holdings in the region include a third of Globe
Telecom Inc., the No. 2 cell phone operator in the Philippines, and a
fifth of Advanced Info Services Pcl, Thailand's No. 1 mobile phone
company. SingTel said earlier this year that it planned to group them
and go public. The investments give SingTel access to about five
million cell phone users.
3G -- which allows Internet functions from finding the nearest
restaurant to downloading video files -- are expected boost
SingTel's revenue among users who are willing to pay for such
services.
``It's the business market that's using 3G and they stand a good
chance of getting that high net worth traffic,'' said Neil Juggins, an
analyst at Prudential-Bache Securities Ltd. in Singapore, who rates
SingTel an ``accumulate.'' ``If they are able to do that in other
markets, they'd have a superb network.''
Operators in the region are expected to spend $550 on each user to
upgrade their infrastructure to offer 3G services, analysts estimate. If
SingTel wants to reach 10 million customers with 3G services, or
double its current users, the group and its partners would have to
spend $5.5 billion, which analysts say it can easily garner.
One obstacle SingTel could face, analysts say, is the few such
licenses going around for foreign players and tough competition
from global operators such as British Telecom.
``SingTel has got an excellent track record of acquiring Asian assets
at good prices but there aren't going to be many opportunities, and
any opportunities would be fought over,'' said Peter Milliken, an
analyst at Lehman Brothers Asia Ltd. in Hong Kong, who rates the
stock an ``underperform.''
Asian Focus
SingTel has been focusing its attention on Asia for the past two
years after investing in other regions. It recently sold off assets in
Europe though it's still holding on to its one-eighth stake in Belgacom
SA, Belgium's biggest phone company. This is the company's
largest investment up to now. In the past two years, it bought stakes
in Thai and Indian phone companies.
More than four years ago, SingTel paid $653.4 million for an eighth of
Belgacom. Earlier this year, it valued the investment at as much as
$1.7 billion. SingTel, at its current share price of S$2.62, is valued at
$23 billion.
In addition to building 3G networks in Asia, SingTel is also looking to
tap the resale market, where it would buy air time at a discount from
existing operators and repackage it for consumers.
The resale venture, jointly owned with Richard Branson's Virgin
Group, will start operations in Singapore, Hong Kong and Taiwan
from the first quarter next year and may offer 3G services as well.
Within 18 months, Chow expects the company's value to reach $1
billion on a base of 500,000 users and valuing each customer at
$2,000.
SingTel said it expects to spend S$1.3 billion in the island state over
10 years, excluding license fees, to build the infrastructure for its 3G
network.
Chow said he is concerned Asia will charge high licensing fees,
along the lines of those in Europe.
In the U.K., phone companies paid 22.5 billion pounds ($32.6 billion)
for five 3G licenses, while they bid 50.5 billion euros ($44.6 billion) for
six permits in Germany. In Asia, Korea has awarded three 3G
licenses based on the merit of the operators, and will charge them
about $1 billion each for the licenses it's giving out.
In Japan, three 3G licenses were also given out to the country's
biggest operators. Hong Kong said it may award four 3G licenses.
License Mode
The Singapore government is expected to decide how it will award
3G licenses for the island this month. It's expected to give out
between four to six of them.
``I'm not concerned about licensing fees but I'm more concerned
about the overall growth of the market because customers will end
up paying for it,'' Chow said.
Singapore should consider a ``pay-as-you-go'' method, where it gets
a cut in each operator's revenue, suggested Chow. The existing
mobile services work off that licensing model, which analysts
estimate is 1 percent of cell operators' sales. Chow said this is
reasonable.
SingTel has more than 1.2 million mobile phone subscribers, giving it
about 60 percent of Singapore's cell phone market. A third operator,
StarHub Pte., entered the market in April after SingTel shared the
market with MobileOne Asia Pte. for the past three-and-a-half years.
According to Chow, SingTel collects S$90 each month from
customers who sign up for monthly plans. It also earns an average
of S$20 from users who buy store-value cards that help use cell
phone services in a pay-as-you-use format.
These revenue rates are similar to a year ago before a third
operator entered the fray. About 70 percent of subscribers are on
monthly plans. |
