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True and Jasmine win Thai 4G licences with record bids

Thailand’s 4G auctions have set a world record for price per megahertz, with True Move and Jasmine beating out the market leaders to win licences.

Number three True Move and newcomer Jasmine International each bid more than US$2 billion for 10MHz of low-band spectrum – a new world record. True bid THB76.3 billion to obtain 10MHz of 900MHz spectrum, while Jasmine acquired a similar amount for THB75.56 billion. Both bids exceeded the reserve price of THB12.8 billion by nearly six times.

AIS and dtac – respectively the first and second placed operators – lost out in this round of auctions, which consisted of 199 rounds of bidding across 4 days. The auctions brought in a total of THB151.86 billion ($4.22 billion) for the government. Combined with the $2.25 billion generated by last month’s 1.8GHz auction, Thailand’s 4G auctions have now raised THB232.66 billion for the government.

True won big in the 1.8GHz auctions as well, paying THB39.8 billion for a 15MHz block – 150% over the reserve price. AIS procured a similar amount with a THB41 billion bid, and both operators have pledged to begin their 4G offerings as soon as this month – although neither has specified where their services will be available.

Spending big in both auctions is likely to have a significant impact on True’s bottom line. The operator has shelled out a colossal THB116 billion ($3.22 billion) on its 2 blocks of 4G spectrum, although CEO Suphachai Chearavanont said that its bid for the 900MHz block was “within our expectations of reasonable value, following our considerable research into determining the real value of the spectrum.”

Following the operator’s 1.8GHz win last month, the ASEAN-focused consultancy firm AEC Advisory predicted that “the impact on True will be much greater as its EBT in absolute terms is less than one-tenth that of AIS.” The firm’s managing director Dominic Arena added that the annual amortisation costs for the spectrum were equivalent to 67% of True’s current earnings before tax.

Meanwhile, Jasmine’s spectrum spend will need to be complemented by a major investment in infrastructure. While funding is not a problem for the Thai ISP, it won’t be able to rely on infrastructure sharing and will therefore need to deploy around 10,000 base stations in a short space of time. It also faces the challenge of entering a market with 3 established rivals and very high mobile penetration.

Ratings agency Fitch has projected that net debt for operators in Thailand will be jacked up by the high cost of spectrum and the CAPEX for network expansion. While this will lower their financial leverage in the short term, the advent of 4G is expected to provide a THB1 trillion ($28 billion) boost to the Thai economy across the next 5 years.

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