S'pore offers bigger carrot as 3G race turns corner

S'pore offers bigger carrot as 3G race turns corner

SINGAPORE (Reuters): In a surprise about-turn, Singapore has cut the cost of its third generation (3G) licenses by one-third, lowering upfront investment risk for telcos, but analysts wonder if the sweetened terms will hot up the race.

They said while a reduction in the minimum bid to S$100 million ($57 million) from S$150 million was more representative of present market value, the auction was still likely to be fought only among the three incumbents and remain a subdued affair.

"It's great for the incumbents to get another S$50 million off but I don't necessarily think that it will make it more competitive for the licenses," Michael Millar, telecoms analyst with SG Securities, told Reuters.

The government also said it was delaying a nationwide rollout of services by one year until December 2004 because of concerns over the delays in 3G network and handset equipment availability.

The changes came only weeks after it said it would not make major alterations to the 3G license process, and was prepared to issue less than four, even if demand does not measure up.

3G allows for fast data and voice transmission on mobile phones and sophisticated applications such as downloads of streaming video and CD-quality music and video conferencing.

Analysts said the "discount" follows the recent lukewarm response to European 3G auctions and likely poor showing.

The government agrees the climate is no longer the same.

"The assessment is that the market value of 3G licenses has dropped considerably," Communications and Information Technology Minister Yeo Cheow Tong told parliament on Thursday.

"Market sentiment has weakened considerably, and there is greater uncertainty over the business case for 3G," he said.

Singapore said in October it would offer four 3G licenses valid for 20 years and set S$150 million as the reserve price, which was "not up for consultation", for each one.

Singapore delayed its 3G auction from February to April as some telcos had asked for more time to be consulted on the rules.

Local operators Singapore Telecommunications, MobileOne (M1) and StarHub, who have said they would bid for a license, welcomed the government's latest changes.

"We appreciate the fact that the IDA has been receptive and responsive to changes in the industry outlook," said Lee Hsien Yang, president and chief executive of SingTel.