Provide sweeteners, not discount, for new telco

The Infocomm Development Authority's (IDA) concession ("Hefty discount on airwaves to woo 4th telco"; July 8) on the reserve price bid for a fourth telco goes against free-market principles.

Preferential treatment for the new entrant is unfair to the incumbents. What if the new entrant, having won the bid, decides to merge or sell its entity to one of the incumbents after operating in Singapore for a year or so?

The IDA should adhere to the original reserve price, but with some sweeteners, such as helping the winner to obtain funding via Spring Singapore, IE Singapore and crowdfunding.

The new entrant can also partner established firms as major shareholders and investors that pump money into the venture.

M1 did that, partnering Axiata Investment, Keppel Telecoms and SPH Multimedia, while StarHub partnered Asia Mobile Holding/ST Telemedia for synergy, finance and strength.

Alternatively, the reserve price could remain at $100 million on condition that the IDA fund 60 per cent of it by buying bonds from the new entrant. Such support can also come in the form of a loan.

Whatever the arrangement, the tender process should not be seen as favouring the new entrant.

Because pricing the spectrum's reserve price at a discount could allow the new entrant to gain a significant business cost advantage relative to the incumbents, the IDA should look into ways to make things more equitable for current operators.

Whether the discount advantage will result in lower price offerings in the market or affect the incumbents' pricing power has yet to be seen, making profit sharing the best way to prepare for the unpredictable.

Any reduction in reserve price means less revenue for the Government and hence less money in the Budget to fund Singapore's social programmes. This is a regressive rather than a progressive change in the government coffers for distribution to the needy.

Francis Cheng

This article was first published on August 4, 2015.
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