JAS Mobile Broadband’s default should serve as a lesson for the country’s telecom regulator: it needs to set better and criteria for the next round of bidding in order to prevent a recurrence of the “winner’s curse”.
The company, which is owned by Jasmine International Plc (JAS), failed to meet the deadline on Monday for a Bt8.04 billion payment on a licence to operate the 4G mobile network on the 900MHz spectrum. This was despite the fact that it had won the bid with a historic offer of Bt75.65 billion in December last year. Yet few observers were surprised by the company’s no-show.
Its default has not only stopped JAS from becoming the country’s fourth 4G mobile network operator, it has also lost its cash guarantee of Bt645 million, though a company executive recently reported to the Stock Exchange of Thailand that this would not affect its financial status.
However, many people are wondering why JAS bid so high and then defaulted on the payment. JAS shares have fluctuated in the past three months over rumours that it might seek a business partner, as well as a public announcement related to its dividend payout and share buy-back programme.
Meanwhile, when an auction fails, it is repeated without considering any figures obtained from the previous bid. Any winning bidder that misses the payment deadline either loses its cash guarantee or faces compensation claims.
This auction, however, was different because there were two sets of 900MHz spectra up for bids. One was won by True Corp via its subsidiary at the offered price of Bt76.3 billion, while the other was won by JAS.
The fact that the National Broadcasting and Telecommunication Commission (NBTC) had to ask for Article 44 to be invoked in order to help it choose between arranging a new auction with a start price close to JAS’s winning bid or give the licence to the second highest bidder indicates that the price may have been a bit too high. However, the regulator has ended up scheduling the next auction for June and setting the starting price at JAS’s winning bid because of the government’s say so.
Observers now believe that few will be able to join the new auction because the starting price is far too high.
Bidders, on the other hand, make their offers based on the information they have, and should be willing and prepared to meet their winning bid.
As for JAS, even if it is sued for compensation of Bt170 million, which is the gap between the original bid and the bid the NBTC expects in a future auction, it would not be worth it when compared to the loss of opportunity and time, as well as the lowering of the licence’s value and delay to people accessing 4G.
So in order to avoid a recurrence of the “winner’s curse” – when the bid winner backs out – should the NBTC demand bigger cash deposits or add more rules to ensure bids are handled more efficiently?