23 November 2012

Nigeria: UK Telecom Auction Exposes NCC Underhand Deals

Despite the frantic efforts by the management of the Nigerian Communications Commission led by Dr Eugene Juwah to justify the sneaky sale of the 800MHz spectrum to Smile Communications Ltd for $17 million (N2.872 billion), the latest plan by the Government of the United Kingdom to auction its 4G licence for as much as $2 billion (N320 billion) Reserve Price is raising questions among industry players.

LEADERSHIP broke the news on October 4, explaining how the Juwah-led NCC with a former top executive (on 13th February 2009 and 28th November 2011) secretly sold 10MHz of paired spectrum in the 800MHz band usable for 4G to Smile Communications Ltd for $17 million. According to industry experts, the resource could have earned Nigeria as much as $300 million (N48 billion) or even higher.

In Germany, the exact same 10MHz frequency spectrum was sold for 1.153 billion euros on October 12, 2009.

According to the UK's telecoms regulator, Ofcom, Nigeria's equivalent of NCC, detailed plan of its delayed 4G licence auction will see the UK government scooping a whopping $2 billion.

A report published by cellular-news said, "Ofcom also confirmed the reserve prices for the spectrum that is being auctioned. The combined total is £1.3 billion (US$2 billion). Ofcom has also announced December 11 as the provisional date for the submission of applications by prospective bidders."

Ed Richards, Ofcom Chief Executive, said: "Today marks an important shift from preparation to the delivery of the auction, which will see widespread 4G mobile services from a range of providers."

The report added that the auction itself is due to take place in January, with licences awarded in February/March with the expectation that the first networks will launch services in May/June time.

The summary of Ofcom's proposal for reserve prices are as follows: 800 MHz 2x5 MHz £225 million; 800 MHz 2x10 MHz (with coverage obligation) £250 million; 1800 MHz 2x15 MHz (Divestment) £225 million; 2.6 GHz 2x5 MHz (standard power) £15 million; 2.6 GHz 2x10 MHz (shared low power) £6 million per bidder, £60m threshold; 2.6 GHz 2x20 MHz (shared low power) £6 million per bidder, £60 million threshold; 2.6 GHz 5 MHz (unpaired £0.1m).

While the damage control embarked upon by NCC in the wake of LEADERSHIP reports is yet to sway right thinking industry watchers, the federal government is already grappling with inadequate funds to implement the 2012 budget, a development that can be linked to underpricing of its assets as the telecom spectrum licence and the attendant corruption, more so at a time managers of the economy are on a borrowing spree, not to mention the budgetary provision for servicing age-old debts.

Those conversant with developments in the telecommunications industry explained that CDMA operators had been using the 850MHZ since the late '90s. Then Nigeria had no allocation from the ITU, and the spectrum was not very competitive.

Part of the spectrum was allocated administratively to CDMA operations from 1997. In 2007 however, the fortunes of the spectrum changed as it was allocated to most countries around the world and identified for IMT, a development that pushed its value sky high.

An expert posited that if Etisalat's 2G GSM Licence was sold for $400 million, and 10MHz of paired 3G License was sold for $150m to each of the 4 winners and one of the winners later sold its own 10MHz of 3G for over $240m, then surely a 10MHz of a more Lucrative 800MHz 4G Digital Dividend Spectrum can easily fetch $300 million.

In Germany the revenue from licensing the 800MHz band was €3.576 billion, that is, for the complete 30MHz. In fact the exact 10MHz secretly sold by Juwah and a former top executive of NCC to Smile for $17 million, fetched 1.153 billion euros in Germany.

LEADERSHIP sources disclosed that Smile applied for 10MHz in 2008, with knowledge of the new fortune of the spectrum. The company applied to be allocated "administratively" (without competitive bidding), but was refused, because NCC initially said the spectrum was not available.

However, the NCC curiously changed its position on the spectrum sale and awarded 15MHz (more than what was requested) in the first leg of the paired spectrum to Smile Communications Ltd secretly and without any competitive bidding and also short-circuiting the internal approval processes on 13th February 2009.

This action LEADERSHIP gathered was to see if any eyebrows would be raised, and when no one contested the secret deal, on 28th November 2011 NCC under Dr Juwah went ahead to sell the second leg of the spectrum, also in secrecy and without competitive process as required by Section 33(3) and 4(2) of the Communications Act as well as Sections 55-58 of the Procurement Act 2007.

According to our source, Smile applied for 10MHz of the 800MHz band usable for 4G in 2008 and paid N2.154 billion ($13.4m) on 13th February, 2009 for it, and got 15MHz for that price. The remaining 5MHz was sold secretly to it for a proportionate value of N718.2m ($4.8m).

This was at a time when exact paired leg of 10MHz fetched 1.153 billion euros in Germany, 992 million euros in Italy and 891million euros in France, and the UK has now set minimum price of £225 million for half of it (5MHz Paired) in preparation for competitive auction in January 2013.

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