The Nigerian Communications Commission (NCC) has explained why it fixed the reserve price for the soon-to-be-auctioned N3.5GHz spectrum at N234.6 million each.
According to the Executive Commissioner of Technical Standards at the NCC, Engr. Ubale Maska, this is to ensure that interested companies do not buy at a price lower than what MTN and Mafab Communications bought theirs last year.
Maska who disclosed this during a stakeholder engagement forum on the 3.5GHz spectrum auction held in Lagos on Tuesday, said it would be unfair for new bidders to pay lower than what past bidders paid for the same product.
The NCC explained this amid complaints by some industry stakeholders who have argued that the reserve price is too high and may discourage potential buyers from participating in the auction scheduled to hold on December 19 this year.
“I am sure people in the industry are aware that auctions normally take place when the seller does not know the actual value of what he wants to sell. So, you come up with an idea of what it should be and set it as the reserve price. The auction now determines the actual value.
“The last auction has established the actual value of the spectrum to be $273.6 million. So, if any auction of the same product is to take place that should be the starting point. Otherwise, if the reserve price is lower and only one player shows interest, it means the person will be getting it at the reserve price, which is lower than what the operators from the last auction paid, and that will be unfair to them. So, the proper thing is that having determined the actual value, you make it the reserve price for future auctions.”
Meanwhile, industry players have complained that the reserve price for the spectrum auction is too high and could discourage potential buyers from participating. Specifically, Huawei, which provides equipment for telecom operators, said in its comment on the auction’s Information Memorandum that the high reserve price may lead to a situation where no operator will show interest in buying.
Although the NCC insisted that the decision to auction the 5G spectrum was not motivated by the need to generate revenue for the government but to deepen access to fast internet in the country, the government stands to gain a lot from it revenue-wise.
Going by the reserve price of $273.6 million, the Federal Government will be raking in at least $507.8 million from the auction, if the 2 lots are sold. If more than 2 operators show interest in buying, the government will receive more money as the price goes up through bidding.
According to the Information Memorandum, the would-be winners of the licences are expected to pay the federal government on or before 20th January 2023.