Strong opposition to CityNet’s proposed acquisition of OpenNet

SINGAPORE — Seven stakeholders in the Next Generation Nationwide Broadband Network (Next Gen NBN), some of which are direct competitors with one another, have joined forces to deliver a strongly worded response to the Infocomm Development Authority (IDA), calling for it to reject CityNet’s proposed acquisition of OpenNet.

The response was released yesterday as the IDA concluded the public consultation on a deal which the operators believe would entrench SingTel’s dominance in the telecoms market, and would not guarantee OpenNet’s service standards would improve.

“If approved, the proposed consolidation would see SingTel becoming the 100 per cent beneficial owners of the only other nationwide fixed telecommunications network in Singapore, apart from SingTel’s own network,” said a joint statement by M1, StarHub, MyRepublic, Nucleus Connect, SuperInternet, ViewQwest and the Asia Pacific Carriers’ Coalition.

The proposed acquisition would see OpenNet acquired by NetLink Trust through trustee manager CityNet. SingTel is the sole unit holder of the business trust but has no control over NetLink Trust under the Business Trust Act, CityNet Chairman Yap Chee Keong said previously.

But that cut no ice with the alliance of operators.

“We must respectfully dismiss any suggestion that CityNet will be a ‘neutral’ or ‘independent’ entity that will serve the best interests of the industry,” said the joint response.

“On the contrary, under the Act, CityNet is obliged to put SingTel’s interests ahead of its own.”

And while SingTel has announced plans to divest over 75 per cent of its units in NetLink Trust to avoid any conflict of interest, the divestment deadline was extended from 2014 to 2018.

“This would result in SingTel being able to expand and exert control over CityNet for the next five years, further entrenching SingTel’s incumbent position,” the operators said.

The joint response, described by the operators as an “unprecedented show of solidarity”, surprised Mr Ajay Sunder, Senior Director of Asia Pacific Telecoms at Frost & Sullivan.

“This is something you don’t see in the industry — that they are putting together a very strong collective voice shows there are widespread worries, especially about CityNet’s independence,” he told TODAY.

Meanwhile, the seven operators questioned how the deal would improve OpenNet’s much maligned service standards.

There were also no guarantees that the public and the industry would benefit in practical terms, they added.

On the service issue, the IDA noted in a statement that it had been actively monitoring OpenNet’s performance. The company was served a notice just last month, after failing to take all orders from January in a breach of requirements under the Universal Service Obligation.

In addressing the concerns raised by the operators, CityNet said it was mindful of service issues and would focus on addressing them.

On the question of independence, Acting Chief Executive Jacqueline Ong said CityNet operates in a highly regulated environment.

“There are safeguards in place to prevent SingTel from having control over NetLink Trust. CityNet’s independence is also preserved by a majority-independent board and a professional management team.”

And SingTel reiterated that it does not have effective control over NetLink Trust or CityNet.

“NetLink Trust and CityNet operate within a strict regulatory framework that ensures open access to the Next Gen NBN fibre network and regulated pricing to all industry operators,” the firm said in a statement.

Responding to the feedback in the public consultation process, the IDA said it would look through the transaction details to ensure CityNet’s independence, adding that it could impose further controls and regulatory conditions to ensure that the situation continues if the deal is approved.

Despite the chorus of voices that have come out in opposition, with similar concerns raised in other responses, Mr Clement Teo, Senior Analyst at research firm Forrester, said the IDA would consider the deal on its own merit, while carefully assessing the implications for the industry.

“Just because these seven have come together doesn’t mean the IDA will pay more attention to what they are saying,” Mr Teo said.

“And if the deal does go through, the IDA will do whatever is in its power to make sure management and control of the new entity stay completely separate.”

The IDA said a decision on whether to approve the deal would be made latest by Dec 19.