by millionairemind » Thu Aug 21, 2008 9:09 am
Published August 21, 2008
StarHub and M1 lose HK broadband bid partner
City Telecom pulls out of alliance; Qatar entity steps in as replacement
By WINSTON CHAI
(SINGAPORE) The two-horse race to the finish line of a mammoth government tender for building Singapore's new broadband highway took a dramatic twist with Hong Kong's City Telecom pulling out of its alliance with local operators StarHub and M1.
This sudden development came to light yesterday afternoon when the IDA updated its website for this project.
The withdrawal of the Hong Kong-based telecommunications conglomerate comes a month before the Infocomm Development Authority (IDA) announces the results of its ongoing NetCo (Network Company) tender evaluation.
This sudden development came to light yesterday afternoon when the IDA updated its website for this project. The regulator requires all bidders to seek its approval before changes can be made to their membership make-up.
City Telecom was previously leading the Infinity Consortium - a grouping which includes StarHub and M1 - in the bid to build the broadband highway. It was the only member of the grouping with hands-on experience in building a similar network. Singapore's largest telco, SingTel, submitted the only other proposal as part of OpenNet, a group led by Canada's Axia NetMedia which includes two other members - Singapore Press Holdings and Singapore Power subsidiary SP Telecommunications.
With City Telecom pulling out, StarHub will now take the helm at the Infinity Consortium. No reason was given for its sudden departure but StarHub said the void left by City Telecom would be filled by the Qatar Investment Authority (QIA), the investment arm of the state of Qatar.
Although it has not been officially announced, City Telecom was the likely majority shareholder in the three-party venture. This was because M1 and StarHub are unlikely to have more than a 30 per cent stake each in the NetCo. This is the result of an IDA clause to ensure fair and open competition in the Republic's new broadband playing field.
'From today, QIA becomes a long-term strategic partner through its participation in the consortium. QIA expects to provide the Infinity Consortium with substantial financial support and expertise in business operations and oversight of the management of the Next-Gen NBN rollout,' said a StarHub statement.
Although the government is providing a subsidy of up to $750 million to lay Singapore's new broadband foundation, market analysts have previously said the massive project could require a similarly large investment from the NetCo.
This would translate to each member of the winning group pumping in amounts in the region of hundred of millions.
While the inclusion of cash-rich QIA may ease the financial strain, industry watchers say the Infinity Consortium may not be able to replace the technical expertise that is lost with City Telecom's exit. This is because the company has previously deployed a similar fibre-optic or FTTH (fibre-to-the-home) network in Hong Kong.
'The withdrawal of City Telecom from the Infinity Consortium is likely to affect its chances for the tender as City Telecom is the only member in the consortium with a proven track record of implementing a nation-wide, FTTH broadband network,' noted Kenneth Liew, a senior market analyst with technology research firm IDC Asia-Pacific. 'Its replacement - QIA - may not have experience in implementing such networks but it will have the financial power to support such projects.'
'It should be noted that IDA's evaluation parameters (for the NetCo) include the level of government grant required, service pricing, terms and conditions, apart from the technical aspects,' said Soh Siow Meng, a senior analyst at Current Analysis. 'While it is not good to lose City Telecom, I don't think we should rule out the Infinity Consortium just yet,' he added.
IDA is expected to announce the winner of the NetCo bid by the end of next month.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch
Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.