Fitch: Spectrum Tussle in SE Asia to Step Up Telecom Competition

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by 
Janice Chong, 
Director
Corporates and Obboon Thirachit
 Director of Fitch Ratings Singapore Pte Ltd


Fitch Ratings-Singapore-03 August 2016: The impending spectrum allocations in 2H16 will intensify telecom rivalries and shape 4G competition in Indonesia, Singapore and Malaysia, says Fitch Ratings. These markets are widely expected to announce spectrum details in the next few months, as telecom regulators reallocate spectrum to meet fast-growing demand for data services.

Telecom operators are facing increasing challenges of high capex investments and spectrum inadequacy, thanks to the proliferation of data services – driven by the availability of low-cost smartphones, and the rise of long-term evolution (LTE) services.

LTE networks are more cost efficient, enabling operators to offer bigger data bundles at cheaper cost than 3G. However, this will eventually put a strain on the networks, resulting in the need for more spectrum and network capacity.

In Indonesia, it will be crucial for fourth-largest telecom operator PT Hutchison 3 Indonesia (Hutch) and the largest mobile operator PT Telekomunikasi Selular (Telkomsel, AAA(idn)/Stable) to win spectrum in the upcoming assignment.

Hutch has the smallest spectrum holding among the four largest Indonesian telcos. Meanwhile, Telkomsel still serves a large 2G market and will require additional spectrum to cater to its growing 4G subscriber base. Approximately 48% of its mobile subscribers are still on the 2G network.

Indonesia’s Ministry of Communications and Information Technology is scheduled to announce the spectrum assignment of two 5MHz blocks of 2100MHz, and two 15MHz blocks of 2300MHz in 2H16.

It is still uncertain whether the regulator will run a, so-called, beauty contest – a comparative tender based on certain criteria – as it did in 2013, or an open auction. 4G adoption has been slow in Indonesia, although the reassignment of 1800MHz spectrum in end-2015 helped eased spectrum constraints on LTE services.

In Singapore, the Infocomm Development Authority’s decision to lower the reserve price of the total 60MHz spectrum set aside for a new mobile network operator (MNO) and double the allocation in the 2.3GHz band to 40MHz, were pro-consumer. The October 2016 auction will set aside 2x10MHz in 900MHz and 40MHz in 2300MHz for the new MNO, enabling the entrant to compete more effectively as it will have a good mix of spectrum for wide coverage and capacity for 4G services.

Fitch believes the smaller spectrum allocation in the 900MHz band for the incumbents Singapore Telecommunications Limited (A+/Stable), StarHub and M1, will result in the companies raising their capex in the next two years. We think the new MNO will focus on price to gain market share.

The spectrum reassignment by the Malaysian Communications and Multimedia Commission in early 2016 is likely to intensify competition in Malaysia when it takes effect in July 2017. The third-largest mobile operator DiGi and mobile virtual network operator U-Mobile will benefit from a larger allocation of the coveted 900MHz spectrum.

This lower-frequency band is more cost-efficient for 4G deployment because of its wider coverage and better penetration within buildings. Fitch believes this will enable them to challenge the market leaders Celcom and Maxis, whose allocations for 900MHz and 1800MHz have been reduced.

The spectrum fee has yet to be determined. However, the loss in spectrum for Celcom and Maxis may result in the companies increasing capex to construct new sites to ensure service quality is not compromised. There will also be more competition with the debut of fixed-line operator Telekom Malaysia’s (A-/Stable) mobile service with unlimited data, SMS and voice plans.

In the Philippines, the two incumbent telecom operators’ joint bid for San Miguel Corporation’s telecommunications business should ease escalating competition in the sector, giving the incumbents access to, among others, the 700MHz spectrum-frequency.

Meanwhile, in Thailand, Advanced Info Service Public Company Limited’s (BBB+/Stable) 1800MHz and 900MHz spectrum acquisitions in November 2015 and May 2016, respectively, have eased regulatory risk for the incumbent, although second-largest mobile operator Total Access Communication Public Company Limited (BBB/Stable) still faces spectrum uncertainty with its 2G concession expiring in 2018.

 

The post Fitch: Spectrum Tussle in SE Asia to Step Up Telecom Competition appeared first on The Insider Stories.

Source: The Insiderstories
Fitch: Spectrum Tussle in SE Asia to Step Up Telecom Competition

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