Not many within the mobile ecosystem envisaged that the drudgery that attended the auction of the 2.6GHz in June 2016 was to end the exercise with a cold shoulder by the spectrum users. In this report Olubayo Abiodun gave an account of the undercurrent for the snub
BY the time the result of the auction was announced, it was obvious operators who needed the ‘scarce’ resource had silently revolted against the auction of 2.6GHz for reasons oblivious to the regulator. The NCC actually advertised the auction of 14 slots in the 2.6GHz spectrum and the reserve price was $16milion for a slot of the frequency of the spectrum. One lot or slot of the frequency is made up of two portions of 5megahertz (MHz). In the end only MTN expressed interest in the process. In line with the IM, the MNO paid a total of $96million for the licence – a cumulative 30MHz in the 2.6GHz frequency.
What could have incentivized mobile operators to snub a spectrum that they had claimed was critical to their business plans? If anything, the regulator was not in doubt that it had sufficiently catered for the concerns of all and sundry in getting the planned 2.6GHz auction to work. Without prevarication, officials of NCC were convinced that various actions like stakeholders meetings, feedback from questionnaires, direct memoranda submitted by the operators and the Information Memorandum (IM) published on the Commission’s website had cleared the way for a seamless and flawless auction.
But the final result would seem like a slap on the regulator that was shocked to record a single bidder for a spectrum that had previously generated enthusiasm. MTN Nigeria was the sole bidder and preferred bidder for 6 x 5 slots (2 x 30 MHz in the 2.6 GHz Spectrum) out of the 5 x 14 slots. Stakeholders, according NCC’s Director of Spectrum Administration, Austine Nwaulune, had mounted pressure on the Commission to fast-track the auction of 2.6GHz frequency. So what went wrong?
The Executive Vice Chairman (EVC), Nigerian Communications Commission (NCC), Umar Danbatta, was stunned at the poor participation in the auction. “As you are aware the Commission sometime this year, auctioned spectrum 2.6 GHz and we didn’t get the kind of responses we anticipated.” To carry out a clinical review of the exercise, Danbatta said that the post mortem was put in place to help the Commission get a feedback from the industry. He assured that the diverse opinions expressed at the post mortem would form the critical mass that the Commission would deliberate upon in order to project a way forward in the subsequent management of spectrum auctions.
It was not the first time that NCC had witnessed such industry rebuff. It was almost similar story when Bitlux emerged as the preferred bidder in the 2.3GHz spectrum auction in 2014. The auction of the 2.6GHz which initially started in 2014 was bedevilled by several false starts. The shocking outcome compelled NCC to call for a post mortem with the stakeholders. At the meeting, held on Monday, 17 October 2016, at the Ikeja Sheraton Hotel, Lagos, Stakeholders in the mobile ecosystem blamed prohibitive reserve price for the reason they snubbed the 2.6GHz auction. Sounding more like a practiced catchphrase, the operators said that the high reserve price did not augur well for their business case.
The operators largely represented by officials of Glo Mobile, ntel, Etisalat, MTN, Spectranet and Airtel were unanimous that the high ‘reserve price’ and the perilous operating environment informed the cold shoulders to the auction. The operators also attributed the declining value of Nigeria’s currency which had made any investments requiring funding from shareholders a tall order another sore point in the outcome of the auction.
While commending the regulator for the transparent procedures and processes in arriving at the final winner of spectrum auctions, the stakeholders expressed reservation that auction had always favour investors with the ‘deep pockets’.
The Chief Executive Officer, Spectranet, David Venn proffer new options which could provide motivation for investors to participate in future spectrum auction. According to him, the NCC could consider a proposal on “revenue-sharing” from free allocation of the spectrum to qualifying operators. Instead of asking for upfront payments for the license, he suggested that a sharing ratio could be worked out on the accrued revenue. With that option, he said the operators can focus their capital expenditure on infrastructure building for service provision. According to him, the revenue sharing model has been effectively used in Rwanda, Tanzania and Zambia because in those climes the focus was rather on getting results than the money to be made from selling the spectrum.
Director External Relations, ntel, Osondu Nwokoro, concurred with Venn and also called for a pragmatic review of the monetary and fiscal operating environments of the operators while placing caps on spectrum price. According to him, when a prohibitive reserved price is approved, this will place a serious hurdle on the roll out obligations on the licenses. He said that the NCC must be able to provide succour to the operators so that investments are protected from the sliding value of the national currency. He said that the capacity of the operators to raise funds both locally and from the international market must be considered when roll out obligations are being placed on the licences. He also said that NCC must enforce equitable application of the regulatory rules irrespective of who is involved.
Nwokoro called for a robust review of the spectrum management policy that encourages a re-farming of the spectrum. While asking for NCC to have a second look at the secondary spectrum market, he said that the review should accommodate options that allow licensees to resell and/or share their spectrum with other operators once they could cope and agree on terms between and among themselves. He stressed the need for the NCC to encourage spectrum trading and sharing. This is important, according to him, because the nation is in recession and the market must look for smart alternative to remain productive and effective. He also suggested a re-examination of the spectrum management policy, amen the colocation rule to allow active infrastructure sharing.
Director Regulatory Affairs and Corporate Social Responsibility, Etisalat Nigeria, Nkenna Ikeme, said that NCC could consider a bundled sale of the spectrum. Stressing that since the 2.6GHz is more capital intensive on infrastructure deployments, it could be sold alongside spectrum of lower bands that require lesser capital injections. Nkenna said as well that the Universal Service Provision Fund (USPF) could be more efficiently deployed in a way that aids operators roll out obligations. And for greater impetus, he called on the NCC to expedite action on the policies on national roaming and passive infrastructure sharing. General Manager, Regulatory Affairs, Bharti-Airtel Nigeria, Lateef Akintunde wondered if the NCC could be more flexible by making available lower slots of the spectrum to operators who may desire such based on their business objective.
NCC’s Director Spectrum Administration assured that the Commission will continue to work in the best interest of all stakeholders. He stated that the issues raised by the stakeholders will be considered by the commission. According to him, reserved price was arrived at within the context of the global pricing framework. However, he reassured that the comments of the stakeholders would be taken back to management and it would be reviewed in the line of Nigeria’s peculiarities because the commission is interested in seeing that the industry really progresses.
Nwaulune said the NCC opted for the auction exercise for most of its spectrum sales because it is an efficient way to assign scarce spectrum resources. He stressed that it does not only offer better approach to manage competition, it institutionalizes a fair and transparent allocation process. He added that the process allows for allocation to those most likely to deploy resources valuably and to meet the market circumstances, among others. The Commission, according to him, is determined to put in place measures to improve Broadband penetration in the country.
Director Public Affairs, Tony Ojobo, who represented Danbatta, said operators have often shown lukewarm attitude to the advertised projects of the USPF. But in order to make the USPF better effective to its mandate, he said the management board of NCC was already carrying out a lot of rejig in USPF operations. He said that the operators can now come together as a consortium for the implementation of USPF projects.
Danbatta said that the efficient and effective licensing and usage of frequency spectrum is one of the critical basis on which the explosive growth of the industry is based. According to him, “with the progress made which has addressed voice communications with increased mobile penetration to about 109 per cent, the Commission in line with the objectives of the National Broadband Plan aims to increase broadband penetration across the country to 30 per cent by 2018”.
He said that the catalytic impact that the growth of the telecommunications industry have had on the Nigerian economy has been profound. “This positive impact can be accelerated with the pervasive deployment of broadband infrastructure. As most Nigerians today access the Internet via wireless means, it is critical that important resources for last mile broadband deployment (like frequency spectrum) continue to be effectively, efficiently and transparently licensed for the pervasive spread of broadband services.”
The spectrum band is key for both new entrants and incumbent operators. NCC started the auction process in 2014 suspended it and revived it in March 2015 took its foot off the lever but finally completed the process in June 2016. The regulator engaged in wide consultations with relevant industry stakeholders to determine the best way to issue the spectrum.
“Based on these and observations of developments in the international licensing trends, the Commission has decided to license the available 2×70 MHz slot in slots of 5MHz to be aggregated by applicants through the spectrum auction process,” according to the IM.
The spectrum will be offered on technology neutral basis but for rollout basis, the Commission will follow the International Telecommunications Union (ITU) recommendation, setting aside Spectrum in the 2.6GHz band for the provision of Advanced Wireless Broadband Services.
The IM states that “on completion of the Auction Process, the Commission will issue each winner a ten year National Spectrum licence on a state by state basis and the Federal Capital Territory. Each winner who does not currently hold a Unified Access Service License (UASL) which is the operational licence, will be issued one at an additional fee of N374.6 million.”