Mon, Dec 30, 2019 page16

• Yuanta expects 5G bidding to surge

  PRIME BANDWIDTH: Competition in the 3.5GHz auction is tipped to be intense, as the three biggest players are seeking 100MHz each, but only 270MHz is available

  • By Chen Cheng-hui / Staff reporter
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  Spending at the nation’s first 5G spectrum auction is likely to exceed market expectations, as none of the telecom companies are expected to back down from a battle that is likely to determine their market positions over the next decade, Yuanta Securities Investment Consulting Co (元大投顧) said.

  Total bids could top NT$100 billion (US$3.3 billion) by the end of this week if bidding continues at its current pace, and Yuanta said that when the auction ends next month, the total might rival the NT$118.65 billion total bids in the 4G auction in 2013.

  As of Friday, the 14th day of the 5G auction, bids totaled NT$74.642 billion, the National Communications Commission said in a statement on its Web site.

  Bids for the 3.5 gigahertz (GHz) band remained the most popular, garnering NT$73.2 billion, and bids reached NT$1.442 billion for the 2.8GHz band, although nobody had expressed interest in the 1.8GHz band, the commission said.

  Bidding would exceed market expectations, as there is limited space in the most coveted 3.5GHz bandwidth, Yuanta said.

  “Competition in the 3.5GHz auction will be very intense, given that the big three — Chunghwa Telecom Co (中華電信), Taiwan Mobile Co (台灣大哥大) and Far EasTone Telecommunications Co (遠傳電信) — have all expressed an ambition to acquire 100 megahertz (MHz), while there is only 270MHz available,” Yuanta analyst Amber Lee (李瑜芳) said in a note last week.

  Moreover, smaller players such as Asia Pacific Telecom Co (亞太電信) and Taiwan Star Telecom Co (台灣之星) have also participated in the auction, despite bidding rules favoring the larger players, Lee said.

  Other bandwidths are likely to be harder to commercialize due to equipment unavailability, which should intensify bidding in the prime bandwidths, Yuanta said.

  “As such, we expect even more brutal competition when the auction enters the next stage, when operators will be bidding for shares of the 3.5GHz bandwidth,” Lee said.

  However, high costs for better seats in the 5G era might not be favorable for telecoms’ bottom line in the long term, she said.

  That is because high bidding prices would drive up amortization, while increased leverage after the auction to support cashflow would imply higher interest expenses, Lee said, adding that a significant rise in capital spending for 5G investments would bloat depreciation costs.

  With competition among telecoms expected to intensify as they seek a leading position in the 5G era, while given the limited availability of models to monetize 5G, investors might have a poor appetite for telecom stocks after the auction, Yuanta said.

  Chunghwa shares have dropped 1.33 percent so far this year, Taiwan Mobile shares have risen 6.57 percent and Far EasTone shares have declined 4.45 percent, while the broader market has risen 24.3 percent.
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