In case you haven’t heard it, the Infocomm Development Authority (IDA) has approved the sale of OpenNet to CityNet, a SingTel owned business trust – with a string of conditions attached. As reported on Today, SingTel must sell off 75 per cent of its stake in CityNet, which it wholly owns currently, by April 2018.
OpenNet is a joint venture between four partners: Axia NetMedia (Axia), Singapore Telecommunications (SingTel), Singapore Press Holdings (SPH) and Singapore Power Telecommunications (SPT).
Citing feedback garnered through its public consultation, IDA has also imposed additional safeguards in order for the deal to go through. You can read the details from Ryan’s ZDNet piece here, but this includes veto power on who takes over SingTel’s role as key subcontractor (The telco had apparently volunteered to relinquish this so as to avoid conflicts of interest).
OpenNet have a poor track record in rolling of the country’s Next Generation Nationwide Broadband Network (Next Gen NBN) so far, culminating in a $750,000 fine on Wednesday for breaching quality of service standards. In a statement, Leong Keng Thai, IDA’s deputy CEO and director-general of Telecoms and Post alluded that the new ownership arrangement would resolve this. “It may bring about more streamlined processes that will in turn lead to greater efficiencies and service improvements downstream,” he said.
‘Not good for the market’
I only saw the news earlier this morning, and did a quick off-the-record poll of my contacts in the industry for their sentiments on this development. Unsurprisingly, the responses so far has been overwhelmingly negative. One reply I received from the head of a reputable local security solutions provider sums it up: “I don’t think that’s good for the market.”
Indeed, the concern over competition issues is grave, leading to key stakeholders of the Next Gen NBN had in September taking the unprecedented step of submitting a joint response calling for the IDA to reject the consolidation request.
Even the IDA isn’t convinced that SingTel’s acquisition of OpenNet will not reduce competition, offering a more tame “will not result in a substantial lessening of competition” instead of “will result in lessening of competition.”
Tracing the root of the issue
What is truly ironic about the situation was how internal disputes within OpenNet came to light as early May this year, when numerous complaints about delayed activations surfaced. This excellent report by Ryan Huang on ZDNet highlighted earlier this year how OpenNet was “restricted from engaging other subcontractors to alleviate connection delays as it is contractually required to provide minimum level of work to key subcontractor SingTel.”
Think about it: Internal dispute in OpenNet involving SingTel as a contractor was cited as the cause of installation delays, some spanning 4 to 6 months. Fast forward to November 2013: SingTel acquires entire company and will relinquish its role as key contractor. I can’t quite put a finger on the pulse on it, but it just doesn’t sound right to me.
Of course, the head of a regional hosting company based in Singapore offered me a slightly different perspective. He suggested that having SingTel coming on board is the only viable solution to the current fiasco, and that they can proceed to put someone on board in order to “steer things” in the right direction.
One additional point: It was reported in 2008 that the government will provide OpenNet with a grant of up to S$750 million to roll out the Next Gen NGN. If this is true, the proposed price of S$126 million to buy OpenNet does appear incongruously low.
Will the change in situation really improve the situation? Only time will tell, though I think Today said it best when it reported in September that “the proposed consolidation also fails to address how it would deal with the unresolved and escalating problems the industry faces or how this would benefit end-users.”