IDA Grants Additional 3G Spectrum Without Auction in Singapore

The Infocomm Development Authority of Singapore (IDA) announced yesterday that it would allocate additional 3G spectrum to the three incumbent operators. The IDA had planned to auction three lots of 3G spectrum in the 1900/2100-MHz band in November, but it only received a bid each from SingTel, StarHub and M1 when the registration deadline passed on Monday (4 October). "No more than one Initial Offer was made in respect of each of the three 3G Spectrum Lots available for allocation. Therefore, the 3G Spectrum Rights (2010) Auction will not take place", said the regulator on its website. As a result, the three incumbent operators will each receive a 3G spectrum lot at the reserve price of S$20 million (US$15 million) apiece.

Outlook and Implications

• The planned auction repeats the situation of the original 3G auction planned by the IDA in 2001. The country's three mobile operators were granted 3G spectrum then following a failed auction in which there were no bidders for the fourth 3G licence. The additional 3G spectrum that the IDA will grant to the three operators now was intended for allocation to a fourth player then. The intention to allocate additional 3G spectrum had faced opposition from the three existing mobile operators—SingTel, StarHub, and M1. SingTel asked the IDA to adopt a "simple administrative allocation and set a cap of one lot of spectrum for each of the existing 3G mobile operators." It argued that existing 3G operators would require additional spectrum to cater for growing data usage and to manage coverage quality. Despite the opposition from the likes of SingTel, the IDA decided to go ahead with the auction plan, as it believed that a market-based allocation mechanism or auction was "still the most appropriate approach" to allocate scarce spectrum resources. In response to the criticism, the IDA argues that if the spectrum was priced too cheaply, it would provide the wrong incentives and encourage users to request for and make inefficient use of the spectrum.
• The lack of interest from a fourth player, however, did not come as a surprise, as it is doubtful whether the island nation's highly mature and competitive mobile market could accommodate another player. With a mobile penetration rate close to 140%, there is little organic growth potential, and qualitative growth through the spread of data services has long been the strategic focus of the operators. Furthermore, any new player would find it extremely difficult to compete with the existing players. At the end of June 2010, SingTel led the market with a 44.4% share, while StarHub and M1 controlled 29.3% and 26.3% respectively. The country did have a fourth operator once. Virgin Mobile, a joint venture between SingTel and Richard Branson's Virgin Group, entered the market in 2002. However, it failed to make a dent in the market and pulled out within a year. The lack of a new competitor is good news to the existing operators. Furthermore, additional 3G spectrum will help them satisfy the growing demand for mobile data usage triggered by the increasing adoption of smartphones like the iPhone. Meanwhile, the IDA is mulling the release of spectrum in the 2.3-GHz and 2.5-GHz bands for 4G mobile communications, possibly as early as 2012 (see Singapore: 1 April 2010: IDA Mulling Release of LTE, WiMAX Spectrum in 2012).