Four-way 5G market makes it anyone's game

Singapore

SINGAPORE is poised to award as many as four operating licences for its upcoming 5G wireless networks - double the number mooted in a public consultation earlier this year.

Mobile network operators (MNOs) that miss out on the two nationwide network licences on the table can apply for rights to up to two localised networks under an industry call for proposals launched on Thursday.

Analysts said that although the 5G market could be more crowded than expected, it is too early to tell whether it will descend into a price war like the 4G mobile market did.

Singapore is moving forward with plans for two full-fledged networks, with winning bidders able to start services from 2021; operators must cover at least half the island by end-2022, and will have to lease network wholesale to interested peers.

But, in a twist, two newly unveiled packages will be available for unsuccessful bidders keen on running smaller-scale networks, for hot spots such as smart factories.

The pie is now big enough for all four of Singapore's MNOs - Singtel, StarHub and M1, and Australian entrant TPG Telecom - to each get a slice. Only MNOs are eligible to bid for 5G rights, although other players can team up to form joint ventures.

The two-tiered licensing decision could be a pragmatic move to support Singapore's digital-economy ambitions, said Credit Suisse analyst Johnson Loh, given the daunting cost of the density of infrastructure needed for 5G, and the conflict over technology between the United States and China.

"Allowing more stakeholders... should provide a good trade-off between quality and pace of roll-outs, and costs to consumers," he said.

But industry watchers are unsure of what a four-way competition - even if somewhat lopsided, given the separate licence types - could mean for the bottom line.

Maybank Kim Eng's Luis Hilado said in a report that "higher competition risks could dampen the business case scenarios".

PwC Singapore partner Oliver Wilkinson, who covers entertainment and media, noted that the new networks will draw not just MNOs and the mobile virtual network operators (MVNOs) that lease from them, but also players from fields like mobility and the Internet of Things.

"Given that there might now be all four of the telcos, all with some kind of licences ... it will make for a more congested market and a bit less space for the MVNOs."

But Sachin Mittal, head of telecom, media and technology research at DBS, stressed key differences between the 4G war and the 5G future. With just two nationwide 5G licence holders available - down from four 4G mobile operators - he expects a new industry frontier with network-sharing, since smaller telcos can jointly bid for those full-fledged licences to save on capex.

To sum up the two possible extremes, Mr Loh said that there could be big money to be made if "disciplined pricing and new revenue opportunities" kick in, but weak demand in a crowded landscape "could further erode the MNOs' profitability". He concluded, however, that it is too early to tell how the competition will evolve.

Spicing up the mix will be the smaller-scale 5G licences - which could be construed as consolation prizes, yet may also prove to be cash cows.

"If that's more to serve smart ports, industrial uses and others, that might... frankly give a quicker return on investment," said Mr Wilkinson.

Indeed, such a licensing move signals regulators' confidence in the market's room to sustain four players. Minister for Communications and Information S. Iswaran noting that localised networks reflect a market assessment by the Infocomm Media Development Authority (IMDA).

The increased 5G competition is expected to benefit end-users "and bring about greater choice, more competitive prices and service innovation", he told an industry event.

Meanwhile, MNOs' balance sheets should be able to handle the upfront licence costs for 5G, analysts say.

Nationwide spectrum has been priced at a minimum bid of S$55 million, plus an annual fee of S$154,000 for each lot of 100MHz.

The localised spectrum will cost an annual fee of S$1.23 million for each 800MHz lot.

Mr Loh said MNOs have already rung up 4G spectrum costs in recent years and so are unlikely to be too aggressive in bidding for 5G. But he added that the "reasonable" reserve price - which Mr Mittal separately described as "quite cheap" - should not be too burdensome.

"The idea, really, is to adopt a pragmatic approach," Mr Iswaran later told reporters, noting that the immediate needs and potential for 5G were balanced with commercial considerations. "That's reflected in the way the call for proposals is structured."

Singapore is still on track to have public 5G networks in place by next year, the IMDA has confirmed.

Telcos may submit their proposals, which will be judged on criteria such as offer price and network design and resilience, by January. The IMDA will award the first tranche of 5G spectrum by mid-2020, and plans to issue more from 2024 or 2025.

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