Broadband: 2.3GHz auction raises industry’s hope

Information and Communications Technology stakeholders are optimistic that the successful auction of the 2.3GHz spectrum will boost the Federal Government’s broadband programme, STANLEY OPARA writes

After months of suspense over the bidding process for the 2.3GHz spectrum, the controversy that has engulfed the country’s ICT industry last week was brought to an end as an unexpected bidder, Bitflux Limited, emerged the winner of the spectrum.

Hopes were therefore raised that the development will have a great impact on Nigeria’s broadband roadmap.

A spectrum auction is a process whereby a government uses an auction system to sell the rights (licences) to transmit signals over specific bands of the electromagnetic spectrum and to assign its scarce spectrum resources. Depending on the specific auction format used, a spectrum auction can last from a single day to several months from the opening bid to the final winning bid.

With a well-designed auction, resources are allocated efficiently to the parties that value them the most, while revenue accrues to the government in the process.

In the past decade, telecommunications has turned into a highly competitive industry where companies compete to buy valuable spectrum. This competition has been triggered by technological advancements, privatisation, and liberalisation.

The transparent process, through which the winner emerged, appeared to be unquestionable to all. This notion was also consolidated by the firm which lost out in the bid – Globacom Limited; as it (Globacom) admitted that its decisions with respect to its offer price for the licence was in line with a stipulated business model.

This, however, puts an end to possible clamour or protest by Globacom in the short, medium or long run as the company had taken the outcome of the bid in good faith. This, according to industry watchers, represents one great progress for the ICT industry.

Bitflux, now, is expected to concentrate on meeting its financial obligations to the government on the deal; and all things being equal, start operations in the shortest possible time.

The firm has 14 business days to pay $23,251,000 (which is the amount it offered for the spectrum) starting from February 19, 2014.

“Failure to do this, the offer to pay goes to Glo,” the Executive Vice Chairman, Nigerian Communications Commission, Dr. Eugene Juwah, said while announcing the winner of the bid.

The NCC boss also stressed that even if Bitflux complied in paying in 14 days, it would be given another 30 days to pay N155m for the licence because it does not have a Unified Access Service Licence, which allows it to deploy services on the band.

It is after all these financial obligations have been met that the NCC will issue the licence to Bitflux, according to Juwah.

Bitflux and Globacom qualified at the pre-qualification stage from 19 operators that initially indicated interest to bid for the spectrum licence.

The bidding started with a mock auction a day before the actual auction. The actual bid was witnessed by government officials, industry operators and regulators, as well as the media.

The Director, Spectrum Administration, NCC, Mr. Austin Nwaulune, had said the Commission was operating an ascending clock auction model, where the bidders were expected to continue increasing their bid prices until a winner emerged. The entire process, however, was computer-based.

With a reserve spectrum price of $23m and mark-up of 15 per cent, the bid process started from $26.4m. At this level, none of the bidders indicated interest probably because of the high price.

This, therefore, resulted in the NCC calling for a second bid, which must be above the reserve price of $23m owing to the fact that the ceiling price – $26.4m – was considered rather high.

Bitflux is a consortium of three companies including VDT, BitCom and Superflex, while Globacom is the country’s second national telecommunications operator.

In a bid to ensure transparency, the NCC had said it made sure that the pre-qualification criteria did not make it necessarily mandatory for applicants to have any telecommunications operational licence in Nigeria.

However, applicants must be companies registered with the Corporate Affairs Commission and must transfer an intention-to-bid deposit of $2.3m into a designated bank account.

The NCC said the deposit would bind the applicant to take up a licence, should it be a successful bidder, at the reserve price or any higher bid value submitted during the process.

The regulator also stressed that applicants must be independent from all other applicants under the allocation process.

The licensed operators that participated in the process had to fulfil all existing obligations to the commission, including the payment of the annual operational levy and Spectrum and National Numbering Plan fees prior to pre-qualification.

All things being equal, Bitflux will be granted a Wholesale Wireless Access Service Licence; and the tenure for the WWASL licence will be 10 years, subject to renewal.

The NCC EVC had said that the licensing of the spectrum would engender a deeper broadband penetration in the country. Available data indicates that the country currently has a six per cent broadband penetration but hope to achieve about 30 per cent of the same by 2017.

Such penetration, he added, would further spur a huge potential for the nation’s economic development even as ICT is now contributing about eight per cent to the nation’s Gross Domestic Product.

The Ministry of Communication Technology had already started a sensitisation programme under the National Broadband Roadmap, which is aimed at mobilising the industry, the governments and the general public to become aware and be receptive to the various broadband initiatives in the broadband roadmap.

The Minister of Communication Technology, Mrs. Omobola Johnson, said, “You are aware that the broadband council is already tracking the implementation of this roadmap. We have also established very critical collaborations and even signed some agreements at the various levels between governments at all levels and the telecoms operators.

“The emergence of a wholesale wireless broadband service provider today, will key into that aspiration of the Federal Government, the Ministry of Communication Technology and indeed the industry, to accelerate and optimise broadband potentials for our socio-economic development.”

Johnson said the Federal Government was encouraged by empirical statistics that broadband could transform lives and the nation as a whole as it is already doing in countries where they are optimally deployed.

She said, “We will continue to make reference to the often quoted statistics of a 10 per cent increase in broadband penetration delivering a 1.3 per cent increase in GDP.

“That in simple explanation means that broadband can increase business productivity, can lead to the creation of new businesses and jobs, can save lives, can deliver much needed skills in a developing nation, can provide security, can improve social engagement, and enrich governance.

“The fact that the ICT sector contributes over eight per cent to GDP means that broadband will accelerate the contribution to GDP in many folds.”

According to Johnson, what is more encouraging is that the country’s telecoms growth rate at about 30 per cent per annum indicates a quick return on investments.

That, she said, meant in the long run, that investments could be sustained and further growth achieved.

“As I have always said, if we can achieve our targets of a fivefold increase in broadband penetration by 2017 from six per cent to 30 per cent, we will deliver through broadband, a phenomenal three per cent increase in GDP,” she added.

The President, Association of Telecoms Companies of Nigeria, Mr. Lanre Ajayi, pointed out that the conduct of the spectrum auction was of global standard, and would go a long way in instilling confidence in the system; thereby attracting potential investors to the country.

A Director at Bitflux, Mr. Tokunbo Talabi, while expressing hope of increased broadband access in the country courtesy of the 2.3GHz band, said the decision by the firm to bid for the licence and the result of the bid process, were in tune with the business plan of Bitflux.

He, therefore, said the firm now had only one option, which was to consolidate on its mandate and give Nigerians value as far as broadband access was concerned.