Spectrum valuation leaves duopoly to pave way for third telcos competition

Rhosedel Grace P. Gabac | January 23, 2018

Spectrum is consanguine. It is perpetually under the ownership of all the Filipino people. The National Telecommunications Commission has exerted virtually nil efforts in its management in the country. Valuation has become stagnant to the point that there can almost be no profit for hoarding it anymore.

Why is valuation important? “If values are too low, operators risk not acquiring spectrum that could have created value for their shareholders. If values are too high, operators risk destroying value by paying more than the value they can create.” Spectrum valuation is therefore “highly risky, especially as auctions often involve significant cash (the US AWS-3 auction being a prime example) and receive a high degree of publicity. Correctly valuing spectrum has always been challenging and it is not getting any easier.”

The fundamental parts of spectrum valuation are simple: “The value of a block of spectrum is the difference between the value of the business with the spectrum (often referred to as the ‘with spectrum case’) and the value of the business without (the ‘no spectrum case’). The values of the business ‘with’ and ‘without’ are usually based on free cash flow forecasts that often match the duration of the license. A further basic principle is that we assume that the business always adopts the value maximizing marketing and technology strategy in each business case.”

The dilemma lies because accurate findings can never generate when there are spectrum lords, or “rentiers of the digital age, sitting atop hundreds of billions of dollars’ worth of prized spectrum space, which many plan to use not only for traditional broadcasting but for new, non-broadcasting, high-tech services like wireless phones and computers, or which they plan to sell to the highest third-party bidders.”

What is left of the legitimate owners of the spectrum? The Filipino people are left with a duopoly which provides a stagnant service that doesn’t budge an inch for development and it will continue to do so with the Congress seemingly blind about it.. The burst in the granting of franchises occurred in the 8th to 12th Congresses. Valuing spectrum for spectrum auction participation will pave the way for development and plays a vital role before introducing the entry of a third and fourth telco player.