U Mobile may raise funds with spectrum reallocation

PETALING JAYA: U Mobile Sdn Bhd, which has been allocated 2x5MHz of 900MHz and 2x15MHz of 1800MHz under the spectrum reallocation by MCMC (Malaysian Communications and Multimedia Commission), may consider raising funds via bonds, private debt securities (PDS) or an initial public offering (IPO).
A source familiar with the industry said that the spectrum reallocation will boost U Mobile’s competitiveness compared with the current situation where it is sharing spectrum with Maxis Bhd. Presently, U Mobile does not have any spectrum in the 900MHz and 1800MHz bands.
“The question now is funding. I would say that they will start looking at ways of raising funds now, be it PDS, bonds or IPO but it depends very much on market conditions. Right now, the telecommunications landscape is very competitive,” he told SunBiz.
Yesterday, U Mobile in announcing its allocation of the spectrum said it is looking forward to the timely review of spectrum allocation for 700MHz, 2300MHz and 2600MHz bands by the end of 2016.
“To create a balanced and competitive market where the public’s interest is a primary goal, service providers need a full suite of spectrum to operate more effectively. This will ultimately benefit end-users as the Malaysian government and MCMC continue to positively shape the communications landscape in the years to come,” it added.
Prior to the announcement, Affin Hwang Capital and RHB Research projected that U Mobile would be allocated 2x10MHz of 900MHz and 2x15MHz of 1800MHz.
However, the source said that the allocated spectrum is less than the projected amount possibly due to U Mobile’s limited infrastructure.
Nevertheless, he said the spectrum reallocation would help U Mobile grow the number of subscribers and in turn increase its revenue but this will only take place in 2017, based on MCMC’s timeline for full implementation by July 1, 2017.
He added that the upfront spectrum assignment fee is likely to be RM50 million, assuming that the payment structure will be similar to the previous 2100MHz spectrum, for which the upfront fee amounted to RM50 million spread over five years.
On Monday, MCMC said that the fee for the spectrum is currently being determined and similar to the previous practice for the 3G spectrum, payments will be in phases, which will allow them to rollout services and not pass the cost to consumers.
“While we are going to charge a fee for the spectrum, we recognise that the players need to have sufficient capital to introduce and expand services,” said MCMC chairman Datuk Seri Dr Halim Shafie.
MCMC also said that the spectrum reallocation would only involve four players namely U Mobile, Maxis, Celcom Axiata Bhd and Digi.Com Bhd as these players already have sufficient infrastructure to expand on, to increase competition in the industry.
“A positive takeaway is that the regulator intends to reallocate spectrum to only the four existing players namely Maxis, Celcom, Digi and U Mobile. This rules out the possibility of a new entrant for now. Nonetheless, armed with more spectrum, U Mobile may emerge as a stronger competitor,” said Affin Hwang.
On Tuesday, Digi announced that it has been allocated 2x5MHz of 900MHz and 2x20MHz of 1800MHz while Maxis said it received a reduced spectrum allocation of 2x10MHz of 900MHz and 2x20MHz of 1800MHz.
Yesterday, Celcom announced a reduced spectrum of 2x10MHz of 900MHz and 2x20MHz of 1800MHz. The spectrum will be assigned for a period of 15 years.