With the politicking done and the final rules laid out for 3G licensing in Taiwan, industry players voiced displeasure with the final government plan.
Taiwan plans to auction five licenses for third generation (3G) mobile services, Internet-like services delivered over cellphones, with bidding commencing on Oct. 19 and ending on Dec. 18.
Minimum bids range from NT$4.2 billion (US$121 million) to NT$7.6 billion (US$220 million) depending on the amount of bandwidth, according to the Ministry of Transportation and Communications. The licenses will be good through the end of 2018.
Industry players, however, complained that the price is too high, despite the fact officials have lowered their sights considerably since last year.
"We think the price is too high. It does not reflect the current economic situation," said Nancy Yin, spokeswoman for KG Telecommunications Co (和信電訊).
Officials from Taiwan Cellular Corp (台灣大哥大) were also disappointed by the decision, pointing out the disastrous impact a similar auction had in Europe, where high license fees crippled the industry.
Auctions for 3G licenses in Britain and Germany last year netted a combined US$78 billion for the governments of those nations but sent telecommunications share prices plummeting. Critics of their open auction process said the multi-billion dollar price tag puts too high a financial burden on mobile systems operators.
"The most successful example in the world so far is Japan," said Bill Newton, vice president of Taiwan Cellular. The Japanese government issued licenses to industry incumbents free of charge. Newton believes this is the reason Japan leads the world in mobile phone data services.
Keeping license fees low allows companies to invest more in building a top-notch 3G network and ensures quicker adoption by consumers due to lower connection fees. These factors helped build Japan's telecom manufacturing capability, he said.
Officials at the Ministry of Transportation and Communications defended their decision by pointing out they had lowered a bottom price set earlier this year.
In February, the Nomura Research Institute advised the ministry officials to expect an auction price of between NT$17.3 billion and NT$74.4 billion for each 3G license, far more than the figure finalized yesterday by the government agency.
One official also said the ministry was under a lot of pressure from industry players and other government agencies. The industry wanted the lowest price possible, while some in the government believed the opportunity for making money should be seized.
This year, the Taiwan government will run an estimated NT$195 billion budget deficit.
Analysts supported the government decision.
"The price that the government announced is basically a fair price," said Alex Wu (吳興國), telecom analyst at KGI Securities Corp (中信證券). "Telcos will benefit from the low price ... they can afford this." Wu said the government tag compares favorably with 3G license prices in Hong Kong and Singapore when population figures are taken into consideration.
The price in those areas ranges between NT$3 billion and NT$5 billion, which is lower than Taiwan, but both areas have a much smaller consumer base.
Hong Kong, for example, has around four million mobile phone users, while Taiwan has over 18 million. Wu valued each Taiwan license at around NT$10 billion.
Research notes from analysts at the Hong Kong and Shanghai Banking Corp (HSBC) also said the Taiwan license looks relatively cheap compared with other 3G license auction prices in the region.
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