Wed, Sep 04, 2013 - Page 13 News List

4G bids could be ‘much higher’

POSITIVE:An analyst said Hon Hai Group has the best chance as a new entrant because of its management, strong financials and synergies with existing businesses

Staff writer, with CNA

The bids in a public auction which opened yesterday for the fourth-generation (4G) spectrum are expected to be two to three times higher than the base prices set by the regulator due to competition from new entrants, according to a brokerage firm.

Bank of America Merrill Lynch estimated that bid prices would be similar to those in the 3G auctions in 2002, which would mean an average unit cost of NT$4 billion (US$134.4 million) for 1,800 megahertz (MHz) bandwidth, NT$6 billion for 900MHz and NT$10 billion for 700MHz.

That would bring the total value of the 4G bids to NT$78 billion, more than double the combined base price of NT$35.9 billion set in May by the nation’s telecom regulator, the National Communications Commission (NCC), the bank said in a research note on Monday.

“The new players will most likely prefer the 700MHz [unit], because the savings on capital expenditure and operating expenses could outweigh the higher costs on spectrum,” said Sydney Zhang (張新年), a Merrill Lynch analyst in Hong Kong.

“As competition will likely push up the auction prices, we expect one or two new players will likely exit the auction, so the final winners might be less than seven,” he wrote.

The commission has completed preliminary assessments of seven entities that have submitted applications for the bidding, including four existing operators — Chunghwa Telecom Co (中華電信), Taiwan Mobile Co (台灣大哥大), Far EasTone Telecommunications Co (遠傳電信) and Asia-Pacific Telecom Co (亞太電信).

The three new players are Ambit Microsystems Corp (國碁), backed by the Hon Hai Group (鴻海集團), and two other companies backed by the Shin Kong Group (新光集團) and the Ting Hsin International Group (頂新集團) respectively.

“We think Hon Hai Group has the best chance to succeed as a 4G new entrant because it has an experienced management, strong financials and synergies with its other existing business,” Zhang said.

On the other hand, the 4G spectrum auction will have a big downside for Taiwan’s three biggest telecom operators because of the higher-than-expected spectrum prices, while new entrants could launch disruptive data tariffs and take away market share, he said.

The entire 4G spectrum auction process is expected to be completed in November, taking much longer than bidding for the 3G license, which involved 180 rounds of bidding over 19 days, according to the NCC.

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