Rival bidders for S'pore network project offer different strengths - May 06, 2008 (ST)

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The Straits Times / The Business Times News On SPH

Rival bidders for S'pore network project offer different strengths

'SPH is always at the forefront of investing in new technologies. We would like to put money into what we would call a winner,' says CEO Alan Chan.

May 06, 2008
The Straits Times

THERE were just two contenders in the end who are prepared to tackle the multi-billion-dollar job of building Singapore's next-generation broadband network.

While both consortia are more than qualified to do the job, analysts told The Straits Times that they bring somewhat different strengths to the table.

The OpenNet group - made up of Canada-based Axia NetMedia, SingTel, Singapore Press Holdings (SPH) and SP Telecommunications (SPT) - is a good mix of brand name companies, said the senior vice-president for research at DMG & Partners Securities, Mr Terence Wong.

SingTel clearly offers telecommunications expertise. It has an existing broadband network and unparalleled access to the underground network of ducts needed to upgrade old networks and lay new fibre-optic cables where necessary.

Its presence means a significantly lower cost to build the network.

And while SPT, the telecommunications arm of Singapore Power, is less of a household name, it too possesses a broadband network and access to underground ducts. Again, this would cut down on resource replication.

If the adage that content is king is true, having SPH, Singapore's largest content generator, makes perfect sense. The media group has multimedia websites such as AsiaOne and Stomp, and is launching a video streaming news site, The Straits Times RazorTV, later this year.

The last player and consortium lead, Axia, is virtually unknown in Singapore, but it is built around putting together neutral, open access networks in Canada and France.

OpenNet is up against Infinity, which is led by Hong Kong's City Telecom (CTI) and comprises local telcos StarHub and MobileOne (M1).

The telecommunications and media analyst at research house Cazenove, Mr Lai Voon San, said this group is probably 'technically and operationally' better placed to build the network as CTI has set up a similar high-speed broadband network in Hong Kong.

He also noted that M1 is the 'hungriest' telco as it lacks a network of its own, unlike incumbents SingTel and StarHub. Thus, it will want to see the network up as soon as possible.

And while StarHub also has an existing broadband network, albeit one that needs upgrading, it 'would benefit from an alternative network that would ease constraints on its existing infrastructure', Mr Lai said.

He also noted that StarHub has a formidable library of premium content, thanks to its pay-TV operations.

Ensuring open and affordable access is one of the main reasons why the Infocomm Development Authority (IDA) put the new network up for tender.

Building the network is expected to cost up to $4 billion, although the IDA has offered a subsidy of up to $750 million for the winning party.

The winner can also look forward to a stream of recurring income from reselling access to the network to other interested parties.

While neither consortium would give estimates on how profitable this would be, Axia chief executive officer (CEO) Art Price noted that its Canadian network - smaller than the one proposed for Singapore - generates about $50 million in annual profits.

DMG's Mr Wong said that while either consortium could do the job, 'the odds favour' the Axia-led one as it has 'a lot of the necessary infrastructure already in place' to build the network.

He cautioned that the winner may take a while to recoup its outlay, given that the network is a long-term project requiring a huge investment, despite the IDA's grant.

Analysts said it was the investment, combined with Singapore's small market size, that probably deterred parties like British Telecom, which had earlier expressed its interest, from submitting a bid.

Mr Wong added that the eventual winner would also need a good knowledge of the Singapore market to set up such a network.

The OpenNet consortium partners, represented at a press conference yesterday by

Mr Price, SPH CEO Alan Chan, SingTel Singapore CEO Allen Lew and SPT director Sim Kwong Mian, are confident that they can deliver.

As Mr Chan put it: 'SPH is always at the forefront of investing in new technologies. We would like to put money into what we would call a winner.'