20 February 2014

Nigeria: 2.3GHz Spectrum - Bitflux Edges Out Glo in Flawed Auction

Photo: IT Web Africa
Bitflux Communications.

Bitflux Communications Nigeria Limited bid $23.25million to win the 2.3GHz frequency spectrum offered by the National Communications Commission (NCC) on behalf of the Federal Government for broadband Internet services.

In an auction conducted by the NCC at the Transcorp Hilton Hotel, Abuja, Bitflux offered $23, 251,000 ahead of Globacom's $23,050,001 to win the bid. NCC had a reserve price of $23m.

The development came just as the group chief operating officer of Globacom, Mohammed Jameel, congratulated Biflux but said his company "felt the price of placed on the spectrum was too high for its worth and also too high for our business plan. Our business model does not support such high price, compared to those we have bid for and won in the past."

Bitflux is a consortium of three companies including VDT, BitCom and Superflex while Globacom is Nigeria's second largest mobile operator. The two companies emerged finalists for the auction bid out of 27 others, who expressed interest in the licence auction, having met all laid-down qualification criteria including the payment of the mandatory and non-refundable $2.3 million to the Commission, which represents 10 per cent of the reserve price.

The auction, which was computer-based, employed what NCC called an 'Ascending Clock Auction approach', where the amount to bid moves up from the reserve price, as the bidding process continues. As such, there was a mark-up of 15 per cent over the $23 billion reserve price, making the auction price to start from $26.4 million yesterday.

In the first round of the suspense-filled auction, which lasted about 15 minutes, none of the two firms, put in separate rooms and stripped of all communications gadgets, bid anything. This was an indication that the $26.4 million set for the NCC was considered too high for either of bidders.

This development led to the second stage called 'Tie Breakers', where the bidders were asked to "entre a bid price above or equal to $23 million reserve price and below the $26.4 million" mark-up price. It was at this stage that Bitflux out bided Globacom with its bid of $23.25 million, emerging as winner.

Speaking after winning the bid, Bitflux, led by one its directors, Mr. Biodun Omoniyi, who is also the managing director of VDT Communications, the largest indigenous fibre optic and copper infrastructure provider, said the bid was transparently done and the company was afraid that Globacom's weight in the telecom industry would make the bid difficult for it (Bitflux) to win.

Announcing the bid result, the Executive Vice Chairman, NCC, Dr. Eugene Juwah, said "With the bid price of $23.25 million bid by Bitflux, which is above what Glo offered, Bitfflux has won the one slot of 30Mhz of the 2.3GHz spectrum auction." He said with the Bitflux has also become a 'forerunner of broadband revolution' in Nigeria.

Minister of Communication Technology, Mrs. Omobola Johnson, represented by the permanent secretary in the ministry, Mr. Tunji Olaopa, said the licensing of the spectrum would help in accelerating the 30 per cent broadband penetration target by 2017, as set out in the country's National Broadband Plan.

But some industry watchers have expressed concern over the credibility of the bid process given that only two bidders emerged for such a lucrative frequency spectrum. The auction was expected to be most keenly contested since the auction of the Digital Mobile Licence (DML) in January 2001 that made the way for the emergence of the GSM telecoms operators. Even the House of Representatives waded into the matter as it resolved earlier this month to review the pre-qualification criteria for companies that want to participate in the auction.

Other companies such as Zinox Telecommunications, a mobile arm of the Zinox Group, Airtel, MTN, Etisalat, Mobitel, Main One and Spectranet pulled out of the bid process for different reasons.

The Corporate Communications Adviser to Zinox Telecoms, Mr. Uche Nnadozie, had reportedly said that the company's board made "a last minute decision" to withdraw from the bid because it wants to remain in its area of core competence.

Also, Airtel's Chief Executive Officer, Mr. Segun Ogunsanya, said the company withdrew from the bid because it wants to wait for the 700MHz spectrum of digital dividend that would be available to operators in Nigeria next year after migration from analogue to digital broadcasting must have been successfully implemented.

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