Thursday, April 10, 2008

SingTel, Starhub & M1: Analysts' Reactions to the Next-Gen NBN OpCo RFP


Operational Separation requirements could significantly dilute the attractiveness of the OpCo to the incumbents.

  • Operational Separation significantly restricts their flexibility in the allocation of resources and human talent across the OpCo & RSPs

There is “little incentive for bidders to offer sharply lower ICO prices to what incumbents are charging.”

  • Greenfield entrant into the OpCo space faces a significant degree of risk because his OpCo grant depends largely on meeting adoption targets.
  • Bidders with a higher risk outlook will seek to be compensated for this risk with the possibility of higher returns through higher ICO prices. However, the attractiveness of ICO prices is weighted very highly in the evaluation criteria.

NGNBN is essentially neutral for the telcos and downside is limited.

Credit Suisse

For incumbents, outcome looks neutral at best...

  • At OpCo level it would be easier for infrastructure builders to drag their feet in truly offering open access.
  • Receipt of OpCo licences for SingTel and StarHub would be unlikely to change the competitive dynamics materially.

… and more probably materially negative

  • Additional player into the OpCo space willl begin chasing the existing broadband revenue pool.

Continue to prefer M1

  • Upside potential since M1’s leased line costs could fall and it could defend cellular market share by becoming an RSP.

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