Who are real winners of 900MHz auction?

[webfact]

Who are real winners of 900MHz auction?
USANEE MONGKOLPORN,
SIRIVISH TOOMGUM
THE NATION


AIS CEO Somchai Lertsutiwong, left, shakes hands with True CEO Suphachai Chearavanont after the end of 900MHz licence auction.

BANGKOK: -- FAILING to win the 900MHz licences last week might not necessarily deal a severe blow to the losers, while successfully bidding for the licences could turn into the winners’ burden, industry pundits said last week.

And the prevailing question now is whether Thailand's telecom market still has room for a fourth player to make profit and also see more challengers in the future.

AIS

Three hours before midnight on Saturday, executives of Advanced Wireless Network (AWN), a unit of Advanced Info Service (AIS), reportedly ordered beers brought to their bidding room. Once the auction resumed promptly at midnight after a three-hour break, AWN hit the exit button to drop out of the race.

And when the clock struck 12.15am at the end of round 199, and none of the four bidders raised the price, which meant the auction had finally ended, AIS executives gave a big round of applause and a big cheer.

Some might interpret this as AIS feeling happy because the gruelling marathon bidding, after over 66 hours, had finally ended. Last month's 1800MHz licence auction took only 33 hours to complete. But others might view this as AIS being relieved that it was not a winner and its smugness that the winners paying such exorbitant prices, whoever they were, could run into liquidity problems and may even need to recapitalise.

AIS reportedly calculated that a fair licence price should be about Bt50 billion-Bt60 billion. However, it reportedly kept raising its bid to drive up the price before jumping ship.

The biggest surprise was newcomer Jas Mobile Broadband of Jasmine International emerging as one of the winners of the first licence block by quoting Bt75.654 billion, while True Move H Universal Communication (TUC) of True Corp was the winner of the second block by quoting Bt76.30 billion.

The final price per capita MHz is estimated to be among the highest in the world for an auction of 900MHz.

AIS had prepared a backup plan in case it lost, entailing allocation of 5MHz out of 15MHz of its existing 1800MHz frequency to serve 2G-900MHz subscribers. It is also in talks to lease 2G cellular base stations from TOT to serve these 2G customers.

AIS has more than 45 million subscribers, mostly using 3G. About 1 million are 2G users. TOT granted the 900MHz spectrum to AIS and AIS' concession expired last September. The National Broadcasting and Telecommunications Commission then reclaimed it for auction.

According to AIS, it decided to fold its cards after seeing the bidding price exceed its expected fair value. AIS' last offer was B75.98 billion.

AIS said the decision to exit allows the company to maintain its strong financial status and save money for further rollout of its 4G and 3G networks. There will be future auctions for the company to acquire additional bandwidth, ranging from the 1800MHz and 2300MHz frequencies to 2600MHz. Last month, AWN was won a 1800MHz spectrum licence to operate a 4G service.

AIS is also set to sign the 3G-2.1GHz service offering partnership deal with TOT. The deal gives AIS the right to be the first company TOT will partner with to help develop its 2.3GHz service. Industry players speculate that AIS and DTAC, the other failed bidder, will team up to urge the NBTC to hurry the release of other spectra from state enterprises for auctioning.

DTAC's 1800MHz spectrum does not expire until 2018, during which time the 900MHz bid winners will be paying a huge amount for the 900MHz licence upfront fee. This will discourage them from entering the bidding for the 1800MHz frequency, one industry observer said. However, AIS is expected to face competition from True for data services.

DTAC

The board of DTAC's strategic partner, Telenor, reportedly granted a budget of about Bt70 billion for DTAC TriNet to join the 900MHz licence bidding. This gave DTAC executives high confidence that it would emerge as one victor.

However, their confidence evaporated when the bidding almost passed the budget on the fourth day, on Friday, and the bidding war showed no signs of coming to an end. DTAC dropped out at 5pm on Friday when it quoted about Bt70.18 billion.

After the auction ended, DTAC said it would allocate the bidding budget for expanding its existing 3G and 4G network. It is confident its existing 2.1GHz, 1800MHz and 850MHz bands are sufficient for providing a quality service.

"Now we're working out how to restore subscribers' confidence and we might lower service rates to keep them with us," a DTAC source said.

DTAC is in talks with CAT Telecom on a possible partnership to use 20MHZ of CAT's 1800MHz to offer a 4G service.

Sanpachai Huvananda, CAT's acting chief executive officer, said DTAC's failure to clinch a 900MHz licence gives CAT more bargaining power in the partnership talks.

A telecom analyst said DTAC's failure would hurt its earnings. Without the 900MHz spectrum, DTAC will be forced to expand the 850MHz and 1800MHz networks, which incur an annual concession fee of 30 per cent versus the 5-per-cent annual regulatory fee for 900MHz.

As 850MHz and 1800MHz assets will be depreciated over three years, its depreciation expenses will surge. DTAC will likely be vulnerable, as the 850MHz and 1800MHz concessions will expire in 2018 and there is still uncertainty over when the NBTC will put the 850MHz/1800MHz spectrum up for auction.

True

True now has the biggest chunk of bandwidth under NBTC licences - 15MHz of 2.1GHz, 15MHz of 1800MHz and now 10MHz of 900MHz. "We fight with full force and even at the last minute we didn't know that we would win. I admit that I was shocked when we learned that we won. It looked like a never-ending auction," True CEO Suphachai Chearavanont said.

It is hard to say if the eventual licence price was too high, but it does not exceed the level studied by the financial adviser, he said.

Earlier Suphachai said True wants to acquire as much spectra as possible to enable it to maintain its leadership in wireless data services.

The analyst said that with more spectrum, True could beat DTAC. But True will have to pay Bt40 billion for the 1800MHz licence it won last month. This will constrain its financial capability. If True pays another hefty sum for the 900MHz licence, its leverage is expected to worsen further and put it at risk of having to seek capital infusion.

"If True weakens DTAC, AIS might also enjoy a windfall. If DTAC gets weaker, nothing guarantees that DTAC customers will leave to go to True. They can also go to AIS," the analyst said.

"But if DTAC weakens, DTAC can start a price war and that will hurt all players," he added.

Jas

The announcement of Jas as a licence winner raised several questions, notably its ability to make a profit given the exorbitantly priced licence.

Jas and True will hold a press conference today on their 900MHz business plans.

A telecom analyst was suspicious.

"Why did Jas, with no mobile phone user base, dare to pay so much for the licence when even AIS, with more than 40 million customers ready to use the 900MHz service, decided to exit, as AIS considered the price was too high?"

Jas reportedly is in talks with SK Telecom or Japan's SoftBank over a possible strategic partnership.

The analyst is doubtful the telecom market still has room for new players when even the third player is finding it hard to show a profit.

One telecom marketing guru said that in principle, a newcomer, if it is the fourth one, will be inclined to join with the market leader to beat the third player. He believes Jas would seek expertise and a sales channel from AIS for quick penetration into the mass market.

A Jas executive source said Jas wants to deploy a wireless broadband service to complement its fixed-line broadband service. "We've got no debt and we're confident in our financial strength. We don't understand why they have to be afraid of us as we're just a small player with a strong determination to enter the market," he said.

Source: http://www.nationmultimedia.com/business/Who-are-real-winners-of-900MHz-auction-30275326.html

-- The Nation 2015-12-21

[zaphod reborn]

"But if DTAC weakens, DTAC can start a price war and that will hurt all players," he added.

A price war in Thailand's good old boy telecom industry? I don't think so.

The winners: Thai government and telecom bosses

The losers: consumers, because telecoms will be raising their prices and fees, and no one will notice a difference in service or speed from use of the 4G network, even if they ever are able to actually set it up nationwide.

[kotsak]

A mind boggling amount of $$$ for a POS QoS :/