Malaysia’s confirmation that it will accept bids in its spectrum re-farming process has met with a frosty reception.
The auction proposal was included in a revision to the country’s budget, with the prime minister confirming that a “redistribution and bidding process” would be used to allocate the spectrum. Aimed at increasing government revenue, the move is seen by investors as being very much out of left field as Malaysia has not previously held any spectrum auctions.
With operators disgruntled by Prime Minister Najib Razak’s announcement, investor confidence has been shaken with the result that MYR9.45 billion ($2.28 billion) has dropped off the combined market cap of the country’s top 3 operators. Speaking to the press, TA Securities telecom analyst Paul Yap noted: “the revelation that it will be via a bidding process comes as a surprise”.
Spectrum re-farming was broadly anticipated as many of the country’s spectrum licences are reaching the end of their validity; 2.6GHz licences are issued for a 5-year period due for renewal in 2017, and while the 2.1GHz (3G) spectrum permits last for 15 years, they expire between 2018 and 2020.
However, while spectrum re-farming was expected, the revelation that licences will be issued via auction was not. A bidding process will likely result in mobile operators handing over billions of ringgit to hold on to – or obtain more – 900MHz and 1.8GHz airwaves.
CIMB analyst Foong Choong Chen said: “This is a negative surprise, as our recent conversation with the Malaysian Communications and Multimedia Commission suggested that the regulator was quite happy and did not intend to disrupt the good progress made by the existing mobile operators in building out their mobile data networks.”
Maxis and Celcom could lose a significant amount from this development, as they have the largest spectrum holdings and would therefore need to spend the most. Maxis’ shares fell by 6.4%, while Axiata’s have dropped 8.5% and Digi’s 4.3%.
Holding a spectrum auction to generate revenue is hardly a new tactic – the government of Pakistan has been attempting the same manoeuvre for around a year despite reluctance from operators.