5G spectrum auction; Stakeholders decry cost

By EMEKA EJERE

The Nigerian Communications Commission (NCC), on Monday (December 113) recorded a major advancement in its journey towards deploying the Fifth Generation (5G) network in Nigeria, with two firms acquiring 5G spectrum for $547m after a live auction.

But there are mounting concerns that the cost implication of obtaining the spectrum, which is far beyond the reserve price (RP) of $197.4m per slot, will make it very difficult for the winners to roll out as they would have spent way above their budget for the deployment of 5G technology across the nation.

Stakeholders are of the view that although all the operators will eventually get 5G, those that get the spectrum first might be encumbered with recovering cost rather than focusing on network rollout, which might slow them down.

The commission’s auction for its two available lots of 100 MHz TDD slots of 3.5 GHz band for the deployment of 5G network had been won by MTN Nigeria and Mafab Nigeria Communications Limited.

There are five major mobile licensees in Nigeria, namely Airtel Networks Limited, Emerging Markets Telecommunications Services Limited (trading as 9Mobile), Globacom Limited, NATCOMS Development Investment Limited (trading as Ntel), and MTN Nigeria Communications Plc. There are also other service providers offering fixed and wireless broadband services in the country.

The NCC had approved MTN Nigeria, Mafab and Airtel for the bidding process. The three companies participated in the 5G auction and the bidding began at $199.37m, as against the reserve price of $197.4m set by the NCC.

After about eight hours and 11 rounds of bidding, the auction ended at $273.6m for each available lot, and MTN and Mafab emerged as winners. Bidding was set at $275,904,886 for the 11th round. Airtel remained in the bidding process until the last round when it fell off.

MTN paid an extra sum of $15.9m to be assigned Lot One, the preferred lot, while Mafab was assigned Lot Two, at no extra cost. In its Information Memorandum, the commission had said it was auctioning two lots of 100 MHz each in the 3.5 GHz band ranging from 3500 – 3600 MHz and 3700 to 3800 MHz.

The NCC had explained that each slot of the 5G spectrum was going for an exact price of N75 billion, but added that in an auction, it can go for as high as N100 billion.

Meanwhile, the emergence of Mafab from nowhere to clinch a slot is a big surprise to some observers. An online platform has linked the National Leader of the ruling All Progressives Congress (APC) with the company, a claim NCC has debunked.

Cost Concerns

Before the auction, MTN, Airtel, including the Global System for Mobile telecommunications Association (GSMA) wanted the fees reviewed.

MTN posited that the Reserved Price, RP, is 136 per cent higher than the market value. It recommended that the price should be reviewed downward to about $50 million to ensure full participation of more players.

Airtel, in its submission, wanted the RP reduced to reflect the economic situation in the country. It also claimed that the two slots of 100MHz to be auctioned should be increased to ensure more participation.

GSMA supporting other operators, stressed that NCC should make all slots in 3.5GHz available.

Analysts rank the RP bid of $194.7 million (N75 billion) among the costliest in the world, topping prices from nations like India and South Africa.

They had expressed worries that going by the RP, only two operators, especially those with the financial war chest would be able to bid, thereby leaving many interested parties out. But NCC, at a stakeholders’ forum on the 3.5GHz spectrum in Lagos, disclosed that it arrived at the spectrum price by observing global best practices.

At the forum, the Chairman, Association of Licensed Telecom Operators of Nigeria (ALTON) Gbenga Adebayo, had expressed concern that the price came a bit high for the operators, considering the huge investments they needed to make to ensure a robust 5G rollout in the country.

Adebayo believes that the best government should have done was to make the spectrum license as affordable as possible, so the country could maximize all the potentialities of 5G technology when rolled out.

He said: “Let me say that the telcos will do everything possible to support the government to see out a successful auctioning and a smooth 5G rollout in the country.

“However, our concern is on the reserved price for the auction. That is where the issue is and that is where all the stakeholders should look into.”

President, Association of Telecommunications Companies of Nigeria (ATCON) Ikechukwu Nnamani admitted that Nigeria should not be left behind as far as emerging technologies are concerned, but “reduced spectrum cost would help operators to deliver 5G service to subscribers at an affordable rate.”

Nnamani, who acknowledged that 5G deployment is far more capital intensive than 4G and other lower technologies, recalled that the Nigerian Senate had during a recent public hearing on the technology, expressed concern that the operators might pass the cost to subscribers.

“There is no doubt that the operators are going to spend a lot of money to deploy 5G and they will need to recoup their investments from the service. The only way the cost can be lowered for the subscriber is for the telecoms regulator to make the 5G spectrum’s cost as low as possible, he said.

Efforts to get Nnamani comment on the outcome of the auction as at the time of filing this report were fruitless.

However, immediate past President of ATCON, Mr. OlusolaTeniola, told our correspondent in a telephone interview that the cost of acquiring the spectrum is far more than what it should be if the goal of harnessing the full potential of the 5G network in the country is to be achieved.

“When you add it to the fact that the entire 5G thing is highly capital intensive, you can see that it will not only delay the process, it will also make it accessible only to high net worth individuals and corporate organizations,” Teniola said.

“The gadget (handset) for the accessing of the 5G is about N5,000 and N7,000. How many Nigerians can afford that?

“MTN already has 4G; transiting to 5G may not cost it as much as it will cost those who do not have 4G. So, in all, the high cost of spectrum slot will make the service so expensive because the investors will like to recoup their money.

“What NCC should have done to facilitate the process is to make the slot as affordable as possible to all the bidding firms.”

More Revenue for Government

But to further strengthen its case for the viability of the project, the NCC stated that Nigeria would raise a total sum of N300 billion from the auction of the 5G Spectrum next year.

“The exact price for the spectrum auction in 2022 will give the federal government N300 billion. When the projected revenue is added to it, we are expecting well over N600 billion because it is an auction,” NCC’s Executive Vice Chairman, Prof. Umar Danbatta, had stated during a budget defence session before the National Assembly’s joint committee on communications.

According to Danbatta, the N632 billion targeted revenue will comprise expected proceeds from 5G spectrum auction.

“Each slot of the 5G spectrum is going for an exact price of N75 billion. However, in an auction it can go as high as N100 billion.

“The exact price for the spectrum auction in 2022 will give the federal government N300bn. When the projected revenue is added to it, we are expecting well over N600 billion because it is an auction.

“Our revenue in 2022 will be higher than what is being generated in 2021, which as at the end of September was about N315 billion.

Checks on global deployment of the technology showed that in the USA, Verizon (ticker: VZ) spent $45.5 billion of the total haul, followed by $23.4 billion by AT&T (T) and $9.3 billion by T-Mobile US (TMUS).

It will cost the winning bidders another $14 billion to clear the spectrum for use by wireless companies. Satellite companies such as the bankrupt Intelsat currently occupy it.

The auction, which was conducted by the Federal Communications Commission—began on December 8, 2020 with bidding ending in January. It included two categories of licenses, which will become available in late 2021 and late 2023.

The auction in Brazil started on November 4, with expectations that it will raise around 10 billion reais ($1.87 billion) based on the minimum bids allowed.

The winning bidders will be required to invest about 40 billion reais in 5G infrastructure, the government predicts, with the level of capital expenditure also considered as part of the bid value.

In the UK, the bidding process concluded earlier in March raised £1.36 billion for the 200 MHz of spectrum on offer, exceeding the £1.1 billion reserve price set by Ofcom.