The Infocomm Development Authority of Singapore (IDA) has today released details of the final bid package for the 3G Spectrum Rights auction. This follows a review of the comments and views received on the draft 3G auction rules in the industry, which has enabled IDA to adjust the regulatory...
Singapore, 8 March 2001 | For Immediate Release
The Infocomm Development Authority of Singapore (IDA) has today released details of the final bid package for the 3G Spectrum Rights auction. This follows a review of the comments and views received on the draft 3G auction rules in the industry, which has enabled IDA to adjust the regulatory framework to address the potential bidders' concerns. This adjustment will facilitate the successful rollout of 3G services, which is strategic to Singapore's ambitions to be an Asian leader in mobile communications.
The key revisions made to the 3G regulatory framework and auction rules are as follows:
Auction Reserve Price & Network Rollout
The auction reserve price has been reduced from the S$150m announced earlier to S$100m, in response to feedback from potential bidders. Mr Yeo Cheow Tong, Minister for Communications and Information Technology, explained in Parliament today that the original reserve price was set last year. "However, much has changed in the global telecoms industry since then," said Mr Yeo. "Market sentiment has weakened considerably, and there is greater uncertainty over the business case for 3G. Also, high 3G licence costs in some of the early European auctions have led to debt downgrades throughout the telecoms industry. As a result, many large players have lost their investment grade ratings. This will in turn lead to higher financing costs for, and may slow down, the rollout of 3G networks and services, an outcome which is not in the consumer's best interest," he added. "In the light of such developments, IDA undertook a review of the reserve price. This review factored in revised inputs from IDA's economic consultant, current pricing trends in recent international 3G auctions and feedback from interested parties. The assessment is that the market value of 3G licenses has dropped considerably." (The full text of Minister's Yeo Cheow Tong's statement in Parliament is attached in Annex A).
IDA will also delay the nation-wide network rollout requirement by one year, from 31 Dec 2003 to 31 Dec 2004. This is to address industry concerns over the delays in 3G network and handset equipment availability. In light of this, the term of the 3G Spectrum Rights, and 3G operator licences correspondingly granted, will now be extended until 31 Dec 2021. IDA will also monitor 3G market developments during the course of the year, with a view to assessing the actual availability of 3G equipment in the market as well as the ability of the early movers in Europe to meet their rollout requirement dates. IDA will review by 31 Dec 2001 whether the nation-wide network rollout deadline needs to be further revised to allow 3G operators more time to achieve their network rollout, in which case the operator licence period will be correspondingly extended.
It was earlier announced that new 3G operators would be encouraged to commercially negotiate national roaming onto 2G networks, to facilitate the early commencement of 3G service operations. IDA will establish a 90-day deadline for the negotiating parties to reach a voluntary agreement, after which IDA will intervene to help establish a roaming agreement between the new 3G operator and any one 2G incumbent operator of the 3G operator's choice. The principles used to arrive at the price and non-price terms and conditions determined by IDA will similarly be applicable to other new 3G operators who are unable to commercially negotiate such roaming agreements with incumbent 2G operators, and these terms would remain valid for a period of no more than four years.
However, to encourage a speedy rollout of 3G networks and services, IDA has reduced the duration of roaming terms and conditions determined by IDA. This duration will now be three years from the start of the roaming agreement or until the nation-wide network rollout deadline, whichever is earlier. Subsequently, the 2G operators will only be obliged to allow roaming onto their networks for an additional year at commercially negotiated terms and conditions.
Following industry consultation, IDA further intends to issue a Code of Practice for national roaming onto 2G networks, which will set out the specific charging principles, administrative and implementation details to govern such roaming.
Moratorium on Unsold 3G Spectrum Rights
In the event that the upcoming auction does not result in the allocation of all four 3G Spectrum Rights offered, the remaining Spectrum Rights will not be offered for sale for the next one year. If offered thereafter, such Spectrum Rights will not, until 1 January 2006, be allocated at a price below the reserve price of S$100m.
Information Release during 3G Auction
To further facilitate bidders to bid rationally, more information will now be released to bidders in the course of the auction. After each round of bidding, IDA will release information on all the bids submitted and the identities of the bidders remaining in the auction process. IDA will not release the identities of bidders corresponding to any specific bids. This is to discourage bidders' actions from being influenced by the actions of any particular bidder.
A clarification period ending 19 Mar 2001 will allow industry to seek clarification on the final bid package.
Parties interested to take part in the 3G Spectrum Rights auction are required to submit their applications by 26 Mar 2001. IDA intends to announce the list of eligible bidders by 2 Apr 2001.
The final bid package for 3G Spectrum Rights auction.
ISSUED BY CORPORATE COMMUNICATION DEPARTMENT
INFOCOMM DEVELOPMENT AUTHORITY OF SINGAPORE
About Infocomm Development Authority of Singapore
The Infocomm Development Authority of Singapore (IDA) is a dynamic organisation with an integrated perspective to developing, promoting and regulating info-communications in Singapore. In the fast-changing and converging spheres of telecommunications, information and media technologies, IDA will be the catalyst for change and growth in Singapore's evolution into a vibrant global info-communications technology centre. For more information, please visit www.imda.gov.sg.
For media clarification, please contact:
Ms Dulcie Chan
Manager, Corporate Communication
Infocomm Development Authority of Singapore
Tel: +65 6211-1999
Fax: +65 6211-2227
Ms Jennifer Toh
Manager, Corporate Communication
Infocomm Development Authority of Singapore
Tel: +65 6211-0508
Fax: +65 6211-2227
Annex A: Minister Yeo Cheow Tong's Reply in Parliament During the Committee of Supply Debate, to Question from Mr Chay Wai Chuen, Member for Tanjong Pagar GRC, on Government's Approach to 3G Licensing
Mr Chay Wai Chuen has suggested that successful bidders for 3G licences should pay a lower upfront fee and annual royalties to lower risks and benefit consumers.
Our assessment is that operators will typically charge consumers what the market can bear based on the competitive environment they operate in at any given point in time. So the pricing of 3G services to consumers is not likely to be influenced much by whether the Government charges an upfront fee only or a lower upfront fee with annual royalty payments in the 3G auction.
However, it is true that operators would enjoy lower investment risks by paying lower upfront fees and annual royalties. But this might actually give rise to a less favourable outcome for consumers. This is because when operators are required to pay the full fee upfront, they will want to recoup their investment as soon as possible. This gives them a much stronger incentive to roll out their 3G networks and services early as they strive to be the first to market. They are also incentivised to offer as rich and diverse an array of 3G services as possible, in order to make their service more attractive and obtain a larger market share.
On balance, our assessment is that an upfront fee is more effective in accelerating the development of a richer and more competitive 3G environment, which will in turn lead to a better outcome for consumers. This is why we have decided that the full auction fee should be paid upfront.
This upfront auction fee will be subject to a minimum price, which is the reserve price. Last year, we had set the reserve price at S$150million, using a modelling process which took into account several economic considerations.
However, much has changed in the global telecoms industry since then. Market sentiment has weakened considerably, and there is greater uncertainty over the business case for 3G. Also, high 3G license costs in some of the early European auctions have led to debt downgrades throughout the telecoms industry. As a result, many large players have lost their investment grade ratings. This will in turn lead to higher financing costs for, and may slow down, the rollout of 3G networks and services, an outcome which is not in the consumer's best interest.
In the light of such developments, IDA undertook a review of the reserve price. This review factored in revised inputs from IDA's economic consultant, current pricing trends in recent international 3G auctions and feedback from interested parties.
The assessment is that the market value of 3G licenses has dropped considerably. IDA will therefore lower the reserve price to bring it in line with current international levels. The new reserve price is now S$100million. The auction will proceed as scheduled in late Apr 2001.