4G battle may end in Pyrrhic victory: investor
By Ted Chen,The China postTAIPEI, Taiwan -- In light of the rapidly mounting bids submitted by contending companies participating in the operation license auction for the upcoming fourth-generation (4G) mobile broadband network, institutional investor Merrill Lynch yesterday indicated a downbeat outlook on the prospects of Taiwan's telecoms sector, while issuing share price downgrades for a number of operators.
October 4, 2013, 12:17 am TWN
Merrill Lynch expects the exorbitant bidding amounts to significantly challenge contending companies' finances and profitability, as they attempt to maintain dividend payouts amid expected surges in debt utilization and capital expenditure, according to reports.
With the auctions concluding its 210 rounds at the 21 day mark yesterday, accumulated bidding was last tallied at NT$73.74 billion, exceeding the base bid of NT$35.9 billion by 105.4 percent.
Most notably, contention was especially intense in the prized C1 to C5 frequency blocks in the 1,800Mhz spectrum, with the price of each block swelling by an average of 4.8 times over the base bid, according to Merrill Lynch's findings.
Among the C-blocks, the C5 segment is the most favored by contenders, with total bids exceeding NT$20.4 billion, a figure 6.8 times greater than the base bid of NT$3 billion.
Contention Escalates in Coveted C-blocks
According to the institutional investor, Taiwan Mobile (TWM, 台灣大哥大), and Chunghwa Telecom (CHT, 中華電信), are currently entrenched in a contest for the prized C-frequency blocks. Both companies are pressured by compelling motives to acquire the C-blocks. CHT needs to acquire additional bandwidth segments, in particular in the currently vacant C-blocks, to ensure its position as an early market leader in the upcoming 4G era. CHT is expected to spend upwards of NT$20 billion in the 4G auction, according to the institutional investor.