LTA tender bid sparks ad hike fears

The tender went out mid-December for 25 per cent of the Land Transport Authority’s (LTA) out-of-home business, for a five-year concession to sell advertisements on bus shelter display panels in exchange for rental income.

That portion of the business is currently with JC Decaux whose base bid was second lowest at $8.75 million.

Industry insiders agree that Decaux’s bid should be very realistic, given that they have had that business for some years so should have a strong understanding of its worth and the advertising revenues those properties attract.

The other 75 per cent of LTA’s street furniture, approx 3,000 bus-stops, is handled by Clear Channel Singapore, which bid $18.5 million for the current tender.

But it is Scintillus Global Media’s whopping $57.1 million bid that is raising the most eyebrows and sparking fears of an ad rate hike if they win.

One outdoor specialist goes so far as to describe the bid as insane. “I’ve done the numbers and can’t see how they would managed to recoup that money over five years, especially if Decaux’s bid is a realistic indicator of the business’ worth.”

OOH veteran Ron Graham, who is part of the Scintillus consortium, says fears of an ad rate hike are completely unfounded. “I’ve been in this business 30 years, and although undisclosed publically, the LTA know the strength of our consortium partners.”

Graham says Scintillus is very confident about its numbers, having conducted its own feasibility study. “We think we can deliver the rental to LTA, a high bid does not mean high ad rates.”

A media agency head says that he thinks Scintillus must know what they’re doing and could be ahead of the game technologically. “Just look at how people reacted when bids first happened for the IPL cricket teams compared to how much those teams have proved to be worth.”

Adrian Daniels, managing director of Posterscope Group Singapore, says that for a bid of this nature they would normally expect to see bids within a price range of 10-20 per cent of each other.

"This would suggest based on market drive yields that are significant differences in the amount of inventory each of the bidders is planning to put in the ground. Hopefully the bidders have physically surveyed every single location at least twice, so they should all be at similar inventory numbers.  It is then a question of their choice of inventory and potential technology that will drive the differences."
 
Daniels continues that extrapolating existing yields of the two current street furniture vendors and adjusting supply/demand we would expect a price should be closer then what we are seeing. "So someone is seeing the business very differently in this instance. The two big questions would appear to be if the LTA has the desire for a non-conforming bid? And what are the risks and benefits associated with the various plans presented. I would imagine that having experience in managing this kind of business will be very much front of mind for the LTA."

At $2.35 million, the lowest bid came from SMRT Investments which already handles all the Mass Rapid Transit (MRT) out-of-home media including subway trains and stations. Stroer Malaysia bid $40.3 million and MediaCorp bid $25.54 million.