TPG Telecom will set up a mobile network in Singapore after securing $98 million of spectrum in the island-nation’s New Entrant Spectrum auction.
The Australian telco will spend up to $281 million rolling out a nationwide network within two years, less than analysts were expecting.
The Singapore government reserved mobile spectrum for new entrants to promote competition. Photo: iStock
“The company expects to start delivering services to customers in 2018 and forecasts that it will become [earnings] positive when it reaches a market share of between 5 per cent and 6 per cent, which it believes should be achievable within a short period of time due to the excellent value of the offerings that it will bring to the market,” the telco said in a statement to the share market on Thursday morning.
Six per cent of the Singaporean population is roughly 345,000 people.
Mobile towers need spectrum to send signals, which is a very expensive asset. Photo: Frances Mocnik
TPG is buying spectrum at 900 MegaHertz [MHz] and 2.3 GigaHertz [GHz] and must pay for it within 20 business days. It will pay for the spectrum and network construction from existing debt facilities and the cash it generates from Australian customers.
“This rare opportunity will enable TPG to expand its business into Singapore, bringing tremendous value to Singaporean consumers whilst generating excellent long-term returns for TPG shareholders,” the company’s statement added. Shares were trading a few cents higher at $7.26 on Thursday morning.
TPG beat telcos including My Republic and airYotta in the auction process.
TPG currently sells mobile services in Australia through Vodafone’s network. In 2013 it won 2.5GHz spectrum in Australia at a cost of $13.5 million, but does not use this spectrum yet.
TPG expects to have its new Singapore mobile network operating by late 2018. Photo: Getty Images
Deutsche Bank telco analyst Craig Wong-Pan believes it will take three years for the Singapore network to earn money.
“We now calculate the Singapore investment will generate a net present value of $463 million (versus prev $356 million). Our earnings per share forecasts have increased slightly (<1 per cent) due to lower interest expense. Our [share] target price has increased to $11.24/share (prev $11.20/share) due to the lower capex assumptions.”