The Federal Government has recently launched its Fifth Generation (5G) policy. This was preceded by the auction of 3.5 gigahertz (GHz) spectrum by the Nigerian Communications Commission (NCC), which attracted the rave review of the industry watchers. Yet, there are few outstanding features of the auction, hitherto unknown, that made it hugely exceptional, especially when compared with the record breaking Digital Mobile Licence (DML) of 2001 when MTN and Econet Wireless (now Airtel) paid $285 million each for the auction exercise conducted in January, 2001.
Nigeria retains flagship position in Africa
Nigeria surprised its peers in Africa when it emerged the first country to seize the bull by the horn with 5G trial in November, 2019. The auction of 3.5GHz spectrum and the transparent process confirmed the nation’s enviable position as the number one pacesetter of telecommunications development in Africa. The auction, no doubt, has, in no small measure, placed the NCC and the country in general on the global arena for being the first country in Africa to have successfully conducted a 5G Auction in the C-band.
Why 3.5 GHz auction fetched more revenue than DML of 2001?
The 2001 DML auction, whose bid price of $285 million covered both the operating licence and auction licence for the operators, and it was for a period of 15 years. The actual price minus that of the operational licence was 282,675, 458.21 USD. This is why the recently-conducted auction of 3.5 gigahertz (Ghz) spectrum for deployment of impending 5G network in the country, under the leadership of Prof. Umar Garba Danbatta is considered to have edged it in terms of revenue generation for the Federal Government.
In the successful and transparent auction, three qualified bidders, MTN, Airtel and Mafab engaged in the competitive auction exercise but MTN and Mafab emerged the winners of the two slots of spectrum bands offered for sale in the 2.Ghz spectrum band.
Thus each slot of the recently-auctioned 3.5Ghz went for $273.6 million. And since it’s for 10 years, it’s safe to say that each slot has fetched 84, 549,694 USD more than the DML auction which could only generate 188,450,305 USD for 10 years.
Exceeding reserved price
The was palpable concern that Nigeria may end up like other countries with ignominy of seeing their spectrum returned unsold because the price was not within the reach of their operators. To the light of the Federal Government, the Auction winning price didn’t only exceed the reserve price target of $197.4 million but even rose to $273.6 million per slot (an increase of 38.6%). This has increased the revenue generation of the Commission to the coffers of government.
Considering that the amount is just the cost of the auction and not operating licence, which also brings another stream of revenue to the Government, analysts believe the revenue the NCC has made for the Federal Government is unprecedented in the history of the Nigerian telecoms industry since liberalisation in 2001. According to them, the payment by MTN and Mafab on or before February 24, 2021, will increase the revenue generation of the Commission to the coffers of the government.
First Auction without External Support
It is instructive to note that one of the reasons that made the auction unique was the fact that it was the first auction held by the NCC, with the Commission relying absolutely on the available skills and resources in-house in the Commission, confirming the amount of human capital advancement of the regulator which the International telecommunication Union (ITU) is always proud of. In other words, the auction was also the first held by the Commission using the available skills and resources in-house in the Commission without relying on external consultants.
One of the measures taken by the Danbatta-led NCC was the timely and diligent constitution of an Auction Committee by the EVC in June 2021, the subsequent development of a 5G Policy document as well as the in-house developed Information Memorandum (IM) document for the auction of the 3.5 GHz Spectrum band.
The successful spectrum auction as also achieved by the Commission through the active support of the Board and Management of the Commission to the auction Committee members including the members of the secretariat. Based on the transparent nature of the auction, leveraging a credible software application by technical partners, the auction process has, in no small measure, placed the Commission and the country in general on the global arena for being the first country in Africa to have successfully conducted a 5G auction in the C-band.
The effective and efficient rules used for the auction, as presented in the Information Memorandum (IM) document, were developed fully in-house by the Commission’s inaugurated Auction committee members.
First to Witness 11 Rounds
It is interesting to note that the auction was the first major software-based auction conducted by the Commission and was the first time that an auction conducted by the Commission went up to 11 rounds, due to its competitive nature, ensuring that the government got maximum value from the sales of the spectrum band.
Preffered Lot Determined by Fresh Bidding Process
Another interesting part is that, in line with the processes outlined in the IM, the provisional bidding processes determined who got what in terms of slots. While Mafab was ready to outbid the incumbent operators, it surprisingly conceded the targeted slot to MTN, Nigeria.
“MTN Communications Nigeria Plc made an offer of $15,900,000 for the assignment of a preferred Lot, while Mafab Communications Limited made an offer of $11,120,000 for a preferred Lot. Thence, MTN Communications Nigeria Plc, having made the highest offer was given the right to select its most preferred Lot and it selected Lot 1 (3500-3600 MHz), while Lot 2 (3700-3800 MHz) is consequentially assigned to Mafab Communications Limited at no extra cost,” explained Prof. Umar Danbatta, executive Vice Chairman, while declaring the winners at the December 31, 2021 auction exercise.
First Time of Electronic Sweeping to eschew bugging
Little surprise that the auction has been adjudged to be highly transparent by all observers, including the participant that did not win at the end. This was the first time that an electronic sweeping of the auction rooms was conducted in order to ensure that the process was not compromised by any electronic interference.
In addition to this, anti-corruption agency including the Independent Corrupt Practices and Other Related Offence Commission (ICPC) and other interest groups such as the Association of Licensed Telecom Operators of Nigeria (ALTON) and Association of Telecoms Companies of Nigeria (ATCON), among several other stakeholders invited to witness and monitor the auction process. The transparency of the auction was further boosted by the live broadcast of the process to the general public.
Loser commends NCC for transparency
This and other successful measures put in place by the NCC attracted approval of the stakeholders in the industry. For instance, reacting to the auction exercise, the Group Chief Executive Offer of Airtel Africa, Segun Ogunsanya, whose Nigerian operation (Airtel Nigeria) did not win, commended the NCC ‘for a transparent 5G auction completed on December 13, 2021., adding that Airtel will continue to closely track the 5G ecosystem over the next several years, in particular the availability of affordable 5G devices and relevant use cases.