Spectrum values plummet $68m

By PAULA OLIVER

The Government's radio spectrum auction came crashing back to Earth yesterday as bidders reacted to proposed rule changes by shaving $68 million off the value of the auction.

In the space of four rounds, the auction's value plunged from $135 million to just $69 million, as big bidders withdrew their interest in second and third-generation (2G, 3G) spectrum.

Hardest hit was 3G, from which Telecom withdrew $32.7 million worth of bids and Clear Communications $12 million.

At one stage only half of the supposedly lucrative 3G lots, which offer the chance to view video on portable handsets, registered any bids.

The dramatic change came a day after the Ministry of Economic Development mooted rule changes to end the four-month-long saga.

The proposed changes, which could come into effect next week, would make it more difficult for bidders to lower the price they have already offered for a lot.

Yesterday's activity shows that bidders may have reacted to the proposals by lowering each lot's value as much as they could while there is still a chance. They could then begin bidding under the new rules with little cash tied up. Conceivably, the auction's value could be returned to its starting point of zero if all involved withdrew their bids.

At least one bidder, who preferred not to be named, is extremely frustrated by the shenanigans.

His organisation is ready to start offering services, but is hamstrung by the need for spectrum. The bidder was supportive of the proposed rule changes, but suggested that an even better option could be the "beauty parade" system used overseas, in which the Government itself allocates spectrum.

Potential users are asked to make a submission detailing their plans, and the Government issues spectrum to the organisations it believes will do the best job.

After pushing the e-commerce barrow at its recent summit, the Government was doing little through its auction to help the development of new operators, another bidder said.

Recent alliances between major telcos add another dimension to the auction, and similar trends overseas have forced the Singapore Government to look into anti-collusion rules for its upcoming 3G auction.

Switzerland's 3G auction was scheduled to begin tomorrow, but collapsed this week when bidders formed alliances to cut costs. The result: four bidders lined up for four chunks of spectrum and the auction was called off.

Such alliances have been fuelled by sky-high prices for 3G spectrum.