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Singapore opens up its
telecoms
By Tony Sitathan
SINGAPORE - Singapore is attempting to attract
up to US$2 billion in capital expenditure commitments
from foreign telecommunications companies seeking grants
for new operating licenses to liberalize the city
state's telecoms industry.
Lee Boon Yang, the
minister of information, communications and the arts,
told the recently organized ITU Telecom World 2003
Plenary Forum in Geneva that fully liberalizing the
island republic's telecom industry is designed to
reinforce Singapore's position as the Asia-Pacific
region's premier communications hub.
"We had to
transform our regulatory practices from the regulation
of an entrenched dominant player to promoting
competition in a multi-player environment," he said.
"Competition also had to be carefully watched as
operators vied for shares of a small pie in a market of
less than 4 million people."
Singapore is
running ahead of other Southeast Asian countries like
Malaysia and Thailand in liberalizing its telecoms
industry in advance of a deadline set in talks at the
1999 ITU Telecom World Conference.
"Singapore
decided to jump the gun because it sees more
disadvantages than advantages in protecting its
telecommunications turf from foreign players," said
David Sim, a telecommunications analyst with Gavin &
Associates in Singapore. "Singapore Telecom lost its
exclusive monopoly over the International Direct Dialing
[IDD] fixed line rates in 2001, almost two years ahead
of its scheduled deadline."
The path for the
telecoms industry has not been easy, complicating
Singapore's problems with deregulation. The global
industry in 2000 ran into one of the greatest oversupply
gluts of any industry in modern history. Eager to get
involved in markets they felt they couldn't stay out of,
the world's top carriers bought into virtually every
national telecom system that came up for sale, spending
vast amounts of money and creating huge overcapacity.
Ultimately, that triggered a full-blown industry
depression. By 2000, when eager equities buyers had
driven the market capitalizations of many carriers to
utterly outlandish levels, debt, overcapacity, service
commoditization and customer dissatisfaction came home
to roost. Declining earnings and capital flight drove
many carriers to the edge of bankruptcy - or in some
cases over the edge - and revealed outright fraud in
others. Debt among the top seven major carriers alone
was $221 billion by the end of 2001.
Between
June 2000 and early 2002, according to a study by Darryl
C Sterling and Charles Gerlach of the IBM Institute for
Business Value, investors in US carriers alone lost
nearly $2 trillion. Nor was the US alone. Across the
globe, carriers struggled to survive the economic
conflagration. Singapore Telecoms, with a current market
capitalization of more than S$2 billion, fared somewhat
better.
The less-than-stellar performance by the
telecom industry has played a role in the entire
information technology sector. A case in point is the
billionaire Richard Branson's Virgin Mobile, a
service-based operator, which entered the Singapore
market almost nine months ago with a large media splash
but exited quickly after incurring millions in losses.
The increased competition from incumbents
SingTel, Starhub and M1 has slashed mobile phone rates
by almost 20 percent on average and customer loyalty
programs including free incoming calls and even free
roaming charges have dimmed Virgin's Mobile chances of
survival in the long haul.
But increased
competition in the telecom industry is viewed positively
by Lee Boon Yang, the information minister, who says the
award of additional telecom licenses should create
employment opportunities for more than 2,500 people by
2005. Several foreign telecommunications companies have
expressed interest in entering Singapore despite
concerns over market saturation in both mobile and fixed
line and Internet services.
The government is
hoping that Singapore's unemployment rate, which rose to
above 4 percent throughout most of 2003, an all-time
high since the recession years of 1982 and 1997, would
get some reprieve from the further liberalization of the
telecoms industry.
Singapore began privatizing
its telecoms industry as early as 1992, with the partial
privatization of state-owned Singapore
Telecommunications, or SingTel. That was followed in
1997 by liberalized mobile and paging services in 1997,
by an Internet access service provision in 1998, and
later, international Internet exchange services in 1999.
By April 2000, the government had lifted all
direct and indirect foreign ownership restrictions on
its operating licensees.
"Liberalization has
pushed domestic players in Singapore to be more
innovative and to look outwards," Boon said. "We have no
doubt that economically, a vibrant and competitive
telecommunications sector contributes to the
competitiveness of the nation as a whole." He added that
competition has compelled incumbent telecommunication
operators to become more efficient and to offer products
and services that are more innovative and responsive to
the end user.
"For instance, Japanese broadband
customers can now download an entire movie over the
Internet in 20 minutes. In the US, AT&T has offered
unlimited long distance calls to other AT&T
customers for one flat monthly fee. And text messaging
[ie short message service, or SMS] in developing markets
like the Philippines has led to an entirely new mass
market," he said.
The Singapore government is
betting that its development as an Asian information
communications hub depends on the global competitiveness
of its telecommunications sector being globally
competitive. Singapore is also a major landing point for
major submarine cable systems and hopes to leverage on
the emerging high bandwidth services of the future.
Officials also believe that market liberalization is
conducive to propelling the growth of other economic
sectors.
So far, however, liberalization
exercise has not yielded immediate results. The
infrastructure roll-out has been slow, with operators
opting for the easier alternative of buying rather than
building infrastructure from scratch. Given that
condition, SingTel is expected to remain dominant in
infrastructure.
This has lately led to some
disputes between the other operators in the market, and
SingTel is being scrutinized by the Infocomm Development
Authority (IDA), the telecom regulating body in
Singapore.
Michael Lim, an associate consultant
with a foreign-based risk analysis company, said that
IDA is currently studying the Telecom Competition Code
and that change is expected soon.
"From the
beginning SingTel has a dominant position as an
exclusive monopoly holder for its fixed line services,"
Lim said. "This was due very much to its telecom
infrastructure development in Singapore. Now however we
are seeing its rivals calling for greater and
inexpensive access to SingTel's network. The bigger
question is can the smaller rivals afford or want to
build the nuts and bolts in the telecom infrastructure
or choose instead to run their services over the
existing network provided by SingTel."
Copyright
2003 Asia Times Online Co, Ltd. All rights reserved.
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