NCC: Arguments for Setting New 5G Spectrum Reserve Price at $273.6 Million

TECH DIGEST- The reserve price for the 3.5GHz spectrums that will soon be put up for auction in Nigeria has been set at N273.6 million per spectrum, according to the Nigerian Communications Commission (NCC), in order to prevent interested businesses from bidding less than what MTN and Mafab Communications paid for theirs last year.

It would be unreasonable for prospective bids to pay less than what previous bidders paid for the same goods, according to the Executive Commissioner of Technical Standards of the NCC, Engr. Ubale Maska. The NCC provided this explanation in response to objections from some industry participants who said that the reserve price is excessive and would deter prospective purchasers from taking part in the auction, which is set to take place on December 19 this year. Yesterday in Lagos, during a stakeholder engagement forum on the 3.5GHz spectrum auction, Maska said:

“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 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.” 

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Industry participants have also expressed concern that the reserve price for the spectrum auction is too high and would deter interested parties from bidding. Huawei, a company that makes equipment for telecom operators, specifically said in its comment on the information memo for the auction that the high reserve price might result in a situation where no operator will show interest in purchasing.

Although the NCC insisted that the decision to auction the 5G spectrum was made not to increase government revenue but rather to broaden access to fast internet in the nation, the government still stands to benefit greatly financially from it. If the two lots are sold at the reserve price of $273.6 million, the Federal Government will make at least $507.8 million from the auction. The government will get more money if there are more than two interested operators since the price will increase through bidding.