OREANDA-NEWS. The Info-Communications Development Authority's (IDA) latest announcement of its spectrum-allocation framework will facilitate a more conducive environment for the entry of a fourth mobile network operator (MNO) in Singapore, and intensify competition in the telecommunications sector further, says Fitch Ratings.

The regulator has lowered the reserve price of the total 60MHz spectrum set aside for a new MNO to SGD35m from SGD40m and doubled the allocation of spectrum in the 2.3GHz band to 40MHz. The latest composition of spectrum - consisting of 2x10MHz in 900MHz and 40MHz in 2.3GHz - will enable the new entrant to have a good mix of spectrum for wide coverage and capacity for 4G services. This will enable it to compete more effectively on a level playing field with incumbents Singtel (A+/Stable), Starhub and M1.

We see the new entrant benefitting from the larger allocation of the coveted 900MHz, compared with the 2x5MHz set aside for each of the incumbents. In Malaysia's recent spectrum re-allocation, smaller MNOs were allocated a much smaller 900MHz spectrum of 2x5MHz each. Singtel and M1 currently have 2x15MHz and 2x10MHz, respectively, in 900MHz, while Starhub has 2x5MHz in the Extended GSM band.

Fitch believes the smaller spectrum allocation in the 900MHz band for the incumbents will result in the companies raising their capex investments in the next two years. The lower-frequency band is more cost-efficient for 4G deployment because of its wider coverage and better penetration within buildings.

The IDA will also be putting up 700MHz in a general spectrum auction in the third quarter this year, although the spectrum availability is uncertain pending the analogue broadcast switch-over to digital broadcasting TV.

The 900MHz spectrum rights will be available from 1 April 2017, and the IDA is setting an 18-month deadline for nationwide rollout from the time the spectrum is auctioned (by 30 September 2018). Until 2018, any new entrant is likely to utilise incumbents' networks to offer nationwide coverage. The IDA does not regulate wholesale pricing on mobile services, so Fitch believes the new entrant will have few cost advantages during the initial period to pass down to consumers to build its competitive position. We expect a large cash burn for the MNO, limiting its ability to compete aggressively in terms of pricing in the next two years.

Singtel is the least exposed among the incumbents to the entry of a new MNO, given its diversified income stream. The telco derives only 34% of its funds from operations from its Singapore home market. M1 is the most exposed, due to its domestic-driven revenue and as the smallest of the incumbent MNOs.