21 November 2013 - The Infocomm Development Authority of Singapore (IDA) has approved the proposed CityNet's acquisition of OpenNet with conditions.
Singapore, 21 November 2013 | For Immediate Release
The Infocomm Development Authority of Singapore (IDA) has approved the proposed CityNet's acquisition of OpenNet with conditions. OpenNet is the designated NetCo or Network Company operating under the Next Generation Nationwide Broadband Network (Next Gen NBN) initiative, which is responsible for the design, build and operation of the passive infrastructure layer of the Next Gen NBN.
OpenNet, CityNet, NetLink Trust and SingTel (the "Applicants") submitted a Consolidation Application on 22 August 2013. CityNet, as Trustee-Manager (TM) of the NetLink Trust, will acquire 100% of the issued and paid-up capital in OpenNet. This acquisition will take place in two phases.
In Phase 1, upon completion of the acquisition of the shares in OpenNet, CityNet will hold 100% of the issued and paid-up capital of OpenNet. Within twelve (12) months of the commencement of Phase 1, the assets and business of OpenNet will be transferred and integrated into the NetLink Trust. At the same time, SingTel will relinquish its role as the Key Sub-Contractor (KSC) of OpenNet and transfer its relevant personnel, skills and expertise into the NetLink Trust, thereby enhancing the Post-Consolidation Entity's operational capabilities. CityNet as the neutral, independent TM of the NetLink Trust will be the Post-Consolidation Entity.
In Phase 2, CityNet, as the Post-Consolidation Entity, will roll out the infrastructure, maintain the systems and provide the services previously undertaken by OpenNet on top of its suite of services. The Applicants proposed to enhance the independence of the Post-Consolidation Entity with an undertaking for SingTel to divest more than 75% of its unitholdings in the NetLink Trust by April 2018.
In assessing the proposed Consolidation, IDA seeks to ensure that it will not significantly change the Next Gen NBN market environment, result in a substantial lessening of competition in the market or harm the public interest. IDA also wants to ensure that key regulatory requirements specific to the Next Gen NBN will continue to be upheld. These include Effective Open Access1, No Effective Control, regulation on wholesale prices via Interconnection Offers, OpenNet's Universal Service Obligation and Quality of Service standards.
The Applicants have undertaken to IDA that after the Consolidation, OpenNet and CityNet will continue to comply with all contractual obligations and regulatory obligations imposed by IDA. There will be no substantial lessening of competition, with continued open access requirements, IDA-regulated wholesale prices and non-discriminatory service provisioning. The transfer of the KSC function from SingTel to the NetLink Trust should further assure the industry of non-discriminatory service provisioning by the Post-Consolidation Entity. While SingTel may be the unitholder of the NetLink Trust, the No Effective Control requirement will mean that it will not be able to influence the management and major operational decisions of the Post-Consolidation Entity.
Mr Leong Keng Thai, IDA's Deputy Chief Executive and Director-General (Telecoms and Post), said, "In arriving at its decision, IDA took into consideration feedback given during the public consultation conducted from 28 August 2013 to 25 September 2013. IDA agrees with the comments from the industry and public that stronger safeguards need to be put in place to better mitigate potential competition concerns. The safeguards will help to enhance the independence and neutrality of the Post-Consolidation Entity from SingTel, particularly for the extended period before SingTel divests its unitholdings in the NetLink Trust."
"IDA is of the view that the increased time for SingTel to divest is not unreasonable in light of the scope of the transfer and integration of the relevant assets, business and personnel under the proposed Consolidation. IDA would also stress that April 2018 is not the target date for divestment but is the deadline by which the divestment must be completed," Mr Leong added.
On the need for stronger safeguards to meet potential competition concerns, IDA has decided to impose additional conditions on the proposed Consolidation, beyond those proposed by the Applicants. These include requiring: (a) the activities of the Post-Consolidation Entity to be subject to the oversight of a Monitoring Board, which will focus on and monitor the Post-Consolidation Entity's compliance with the No Effective Control requirements; (b) the Post-Consolidation Entity to seek IDA's approval for subsequent appointment of any telecom or broadcasting licensees and their associates to be its contractor; and (c) CityNet, as the TM of the NetLink Trust, to have full independence in decisions on prices, terms and conditions for new and existing service offerings.
IDA is satisfied that with the continued imposition of the IDA's current regulatory requirements, and the Applicants' compliance with the conditions they proposed and with the additional conditions IDA has imposed, any potential competitive concerns in connection with the proposed Consolidation will be addressed.
IDA also took note of industry and public concerns over OpenNet's performance issues in providing services to its customers and the public. "The creation of a Post-Consolidation Entity that manages ducts, manholes as well as the optical fibre within it may bring about more streamlined processes that will in turn lead to greater efficiencies and service improvements downstream," said Mr Leong.
The Next Gen NBN is a strategic, key infrastructure providing ultra high speed broadband connectivity to support Singapore's social and economic development. IDA will monitor closely the development and progress of the Next Gen NBN and the Post-Consolidation Entity to ensure that the Next Gen NBN continues to bring benefits to consumers and businesses.
For more information, please refer to the Explanatory Memorandum regarding IDA's decision on the Long Form Consolidation Application submitted by the Applicants.
ISSUED BY CORPORATE AND MARKETING COMMUNICATIONS DIVISION
INFOCOMM DEVELOPMENT AUTHORITY OF SINGAPORE
- Explanatory Memorandum On The Decision Of The Info-Communications Development Authority Of Singapore In Relation To The Long Form Consolidation Application Submitted By Opennet Pte Ltd, The Netlink Trust, Citynet Infrastructure Management Pte Ltd And Singapore Telecommunications Ltd (806.46KB)
About Infocomm Development Authority of Singapore
The mission of the Infocomm Development Authority of Singapore (IDA) is to develop information technology and telecommunications within Singapore with a view to serve citizens of all ages and companies of all sizes. IDA does this by actively supporting the growth of innovative technology companies and start-ups in Singapore, working with leading global IT companies as well as developing excellent information technology and telecommunications infrastructure, policies and capabilities for Singapore. For more news and information, visit www.ida.gov.sg.
For media clarifications, please contact:
Note to Editor
1 Effective Open Access refers to the offer of non-discriminatory and non-exclusive access to all segments of the network through structural and/or operational separation and interconnection requirements.