If there were ever any doubts about the Government's intention to pave the way for a fourth telco operator in Singapore, they were dispelled by the Infocomm Development Authority of Singapore (IDA) last week.
Despite the industry's chorus that there was no need - or room - for a new mobile phone operator (MNO), the IDA stuck to its earlier decision, taken last July, and unveiled more details about the reserved spectrum to be allocated to a new MNO.
It also announced that it was reserving a part of the lucrative 900 MHz band, which enables better indoor connectivity, within the 60 MHz of spectrum to be set aside for the fourth operator. It has also reduced the reserve price from the $40 million announced last year to $35 million.
However, IDA's intentions aside, what will determine whether Singapore gets a fourth MNO is not spectrum allocation but money - lots of it. The new MNO will need to have deep pockets or friends with deep pockets in order to be successful, but more on this later.
Why does IDA want a new telco operator in Singapore, where market penetration for mobile phones is already more than 150 per cent? There are many reasons but the primary one is to heighten competition, which in turn could prod the incumbents into making more investments and offering innovative deals to their customers.
This is exactly what happened in the broadband services market in Singapore. Once the Next Generation Nationwide Broadband Network was rolled out, new retail service providers shook up the market. The result: lower prices, more innovative plans and faster speeds from all players.
But there is one major difference between the two markets.
Unlike the broadband market, where incumbents and challengers use infrastructure that has been built and paid for by the Government, a new MNO will have to build up the infrastructure on its own dime.
This certainly raises questions about financial viability.
A rough back-of-the-envelope calculation shows that a new MNO will have to cough up more than $300 million to get a network up and running.
First off, it will have to pay the $35 million for the 60 MHz spectrum. This price could go up if more than one interested party emerges and forces a bidding process.
To date, broadband services provider MyRepublic and Consistel, which set up the Sports Hub's wireless system, have expressed interest.
Apart from the $35 million, the potential fourth MNO, would probably like to join the main auction for the remaining 165 MHz of spectrum to have more spectrum bandwidth.
And after garnering the spectrum, it would have to spend between $300 million and $700 million to get its network operationally ready.
This money must be available, mostly upfront, as the new spectrum will be available in April next year, by which time the new network is expected to become operational. It has to achieve nationwide coverage within 18 months, that is, by September 2018.
As Fitch Ratings notes, the new entrant will have use the incumbents' networks to offer nationwide coverage till its own network is fully built.
The IDA does not regulate wholesale pricing on mobile services so Fitch believes the new entrant will have few cost advantages in the initial period to pass on to its consumers.
Fitch expects a large cash burn, limiting its ability to compete aggressively in terms of pricing in its first two years.
A new entrant will have to build up a war chest before it goes shopping at the IDA spectrum auction, expected in the third quarter of this year.
Consistel has been playing its cards close to its chest since its initial expression of interest.
MyRepublic has quite consistently signalled its interest in entering the fray. It even has a Web page listing some of the benefits it will offer customers.
Explaining the rationale behind its proposed bid, a MyRepublic spokesman told The Business Times that the Singapore market is conducive to hosting a fourth operator, despite small size and high market penetration.
"A more interesting observation about the Singapore mobile market is the stable and high Arpu (average revenue per user) current telco operators are enjoying, relative to other comparable developed markets such as Hong Kong."
Some analysts put the Singapore mobile market Arpu at US$52 (S$73), which is 40 to 50 per cent higher than markets such as the United Kingdom and Hong Kong.
The spokesman said mobile plans lack differentiation in Singapore, especially on price and offerings. "Coupled with the high Arpu, the increase in Singapore mobile data prices in recent years seems to be a clear sign that the market has stagnated; it is time for a fourth telco operator to step in."
He reiterated that the company has not disclosed the size of its war chest but indicated that the plan was to raise US$250 million (S$350 million), and that DBS and Goldman Sachs had been appointed to raise the funds.
The spokesman added that the $23 million that the company raised late last year was for its regional expansion plans and unrelated to its bid to become the fourth MNO.
MyRepublic is in talks with a number of strategic partners from various industries, including major and telecom services vendors, the spokesman added.
A look around the region would show why money is more important than technology or spectrum for a potential new player looking to go up against the incumbents with legacy infrastructure.
This month, the South Korean ICT Ministry rejected all three applications for the nation's fourth mobile licence on the grounds that all three lacked credible plans to raise the necessary funds and to establish networks and provide services, said media reports.
This was the seventh time since 2010 that South Korea has considered, but ultimately failed, to approve a fourth mobile operator.
It should be noted here that in July 2013, during its 3G spectrum auction, IDA had reserved spectrum for a possible new entrant, but no one had come forward.
In Thailand, telco operator Jasmine International is facing increased pressure to find a joint-venture partner for its 4G business by the March 21 deadline. The Thai regulator, National Broadcasting and Telecommunications Commission has issued an ultimatum - pay the bid fee for the 900 MHz licence by then, or face a civil lawsuit.
There is money to be made in Singapore - its 150 per cent mobile phone penetration notwithstanding - and opportunities will come from the Internet of Things and machine-to-machine communication linked to Singapore's drive to become a Smart Nation.
However, only the company which can dial into the money will be able to make the right connection to become the fourth MNO.
This article by The Business Times was published in MyPaper, a free, bilingual newspaper published by Singapore Press Holdings.