TPG more likely to outbid MyRepublic in the 4th telco race

Reserved price for spectrum lots could be higher than $35m.

As announced last month by Infocomm Media Development Authority of Singapore (IMDA), MyRepublic Ltd (MyRepublic) and TPG Telecom Pte Ltd (TPG), are now both pre-qualified to participate in the New Entrant Spectrum Auction (NESA), targeted to complete by end-CY16.

The reserved price for the set aside spectrum lots (two 900 MHz spectrum lots and eight 2.3 GHz spectrum lots) is S$35m. However, OCBC Investment Research believes this price will be much higher as both companies are expected to try to outbid each other at the NESA. 

Between the two contenders, the research house believes TPG has deeper pockets and is more transparent as a listed company in Australia.

MyRepublic's advantage, meanwhile, is the fact that it already has a presence in Singapore as a fixed service provider, it said.

Here's more from OCBC Investment Research:

While we believe TPG is the one with deeper pockets, but if MyRepublic is the one with the winning bid at NESA, it may potentially create a more immediate impact given its existing presence in Singapore’s broadband market given its ability to offer bundle plans (i.e. mobile and broadband) at the start of mobile operations. 

That said, with incumbents holding a portfolio of significantly more spectrum, the 4th Telco will need to incur much more capex during the initial years to build up its infrastructure so as to become competitive in network coverage quality.

With the 4th Telco allowed to participate in the General Spectrum Auction (GSA), which will be open to the incumbents in 1QCY17, we believe themarket could also be concerned that the 4th Telco participation in GSA may push the GSA bids to much higher prices. That said, IMDA has set in place various spectrum caps to prevent monopolization of spectrum resources and ensure an auction outcome where the telcos may reasonably obtain sufficient spectrum to deliver viable mobile services. Hence, we believe the risk of GSA bids skyrocketing will be well- managed by rules set in place by IMDA.