IMDA to look beyond price to draw more 5G bidders

Singapore

IN A departure from typical spectrum rights auctions, the Infocomm Media Development Authority (IMDA) plans to assign 5G spectrum to interested Mobile Network Operators through a Call For Proposal (CFP), with both price and non-price criteria.

The move to incorporate comprehensive criteria beyond price, including mandatory wholesale arrangements, with a CFP could make it more palatable for MNOs to participate in 5G, say experts. This is especially so, given the concerns about the high capital costs of 5G, a potential bidding war and challenging margins in the telco space.

On Tuesday, the IMDA announced that it will facilitate the roll-out of at least two nation-wide 5G networks in Singapore, while encouraging sustainable competition among MNOs. The first tranche of spectrum will be assigned from next year.

The CFP will place only 15 per cent weightage on the offer price for spectrum, said the IMDA, which launched a public consultation on the 5G roll-out; the consultation started on Tuesday and runs till June 19.

The other non-price criteria in the CFP are network design and resilience, network rollout and performance, and the financial capability to fund the roll-out. These have been given weightages of 40 per cent, 30 per cent and 15 per cent respectively.

In addition, IMDA plans to make it compulsory for the awarded MNO to provide wholesale 5G services to other MNOs and Mobile Virtual Network Operators upon request.

The use of a CFP, rather than an auction, could incentivise telcos to invest in 5G despite the steep capital expenditure, said DBS analyst Sachin Mittal. 5G requires more base stations, with each station being more expensive, he noted.

"There is a scarcity of spectrum already, and the business case for 5G is not very exciting... So I think the IMDA is smart enough to not make it more expensive by taking the auction route," he said.

A telco research analyst who declined to be named said: "The call for proposal avoids the potential pitfalls of a bidding war if a spectrum auction is conducted. If the spectrum auction results in high entry costs that impact the winners' ability to finance actual capital expenditure, it would be counter-intuitive to the regulator and government's intention of having full-fledged deployment as soon as possible."

The wholesale requirement also helps smaller players get on board 5G, especially amid challenging times for the telco space, noted Mr Mittal. "Not everyone should invest (in 5G). If you are small, and you don't have (a strong) balance sheet, you can get it wholesale."

But it remains to be seen what the wholesale price will be, he added, and this could depend on whether the government offers subsidies.

Beyond the CFP, there are indications that Singapore wants to encourage collaboration over competition. The IMDA said MNOs may team up to submit a proposal, instead of doing so individually- an idea which Mark Jansen, technology, media and telecommunications leader at PwC Singapore, described as sound, given the high costs. Encouraging collaboration will enable telcos to reduce risk and cost, ultimately benefiting the Singapore economy, he said.

Asked whether they plan to submit proposals, the MNOs did not respond directly, but expressed general optimism. StarHub has been upgrading its network to be 5G-ready, and looks forward to the spectrum allocation, said Chong Siew Loong, the company's chief technology officer.

An M1 spokesman said the telco has run early 5G trials and is evaluating its options; Singtel said it will review the consultation paper.