The Nigerian Communications Commission [NCC] on Monday met stakeholders in the telecommunications industry in Lagos in a fact-finding forum on the response of the operators to the 2.6 GHz frequency band the commission auctioned recently.
In consideration of the importance of the broadband infrastructure in the development and growth of the telecommunications industry, NCC has gone all the way to put the infrastructure in place only to receive what it described as a cold response from the industry practitioners.
The meeting afforded an opportunity for the stakeholders to interact with NCC officials on the key issues in consideration and to provide a feedback the commission needs in planning ahead.
In his welcome address at the meeting, Prof Umar Danbatta, executive vice chairman of NCC, who was represented by Mr. Tony Ojobo, director of public affairs, expressed satisfaction with the progress Nigeria has made in the area of increased mobile penetration.
He said the growth would further be accelerated by increased broadband penetration, which informed NCC’s auction of available spots on the 2.6GHz.
He asked for the suggestions of stakeholders on further improvement on the commission’s licensing services and the effective utilization of available facilities now offered.
These, he said, would define the next steps forward for the commission considering the importance of the spectrum to its success.
Engr. Austin Nwaulume, chairman of the auction committee of NCC, explained the functioning and coverage of the spectrum, which has to be determined internationally before it is made available locally.
He said harmonization of the broadband infrastructure, which happens at International Telecommunications Union [ITU] in Geneva, affords economy of scale that reduces the cost of delivery but also has legacy implications.
He expressed concern that when the auction of the 2.6GHz was done some months ago, the response was below expectation. Only one of 14 slots offered in the auction was taken.
He said NCC knows how important the facility is to the industry operators but when it put it forward, the operators backed out “So, we felt we have to come back to the users of the resource and find out what are the issues”, he said.
Responses by industry operators centred on the huge investment outlay that the licensing fee and product rollout involve and the poor returns outlook in the light of Nigeria’s economic prospects. Mr. David Venn, CEO of Spectranet agreed the NCC’s auction followed a transparent process but said the attractiveness of an auction rests on the prospects for return on investment.
He said it is difficult for foreign investors to justify the expenditure – which involves not only the cost of the licence but also the cost of the product rollout plan. “If your foreign shareholders have to send you additional funds, it is not easy to justify in today’s investment climate of Nigeria”, he said. He suggested that the method of the licence auction should consider cost-revenue sharing, instead of the buyer bearing the entire cost.
Speaking further, he said such revenue sharing option has been operated in some other countries where no cost was placed on the licence. A strong motivation is needed for GSM operators to roll out data services in the light of declining voice revenue, he said.
Part of the challenges facing investors was traced to the foreign exchange difficulties facing Nigeria. NCC officials were told that it is not easy to put up a good business case in the difficult operating environment of today with a confronting initial big cost and lean returns prospects.
Other contributors affirmed that the issue in consideration is about cost and cash flow and that payment of the broadband licence will affect the ability to roll out products and consequently revenue and return on the investment.
The commission was asked to address concerns about poor revenue prospects facing the operators by considering how a hedge can be provided in the light of the exchange rate situation and foreign remittance issues.
Broader issues affecting investment in the country generally were also highlighted to which contributors said the telecomm industry is not insulated.
Attracting new investments even within the economy is said to have become a big challenge in view of the difficulties facing the banking sector.
NCC was asked to consider lowering the cost of the spectrum licence or a lower spectrum size.
Other issues raised include the need to add some flexibility to the use of the spectrum such as spectrum sharing such that the buyer could recoup part of the investment in addition to the revenue from product rollout.
The commission was asked to permit a shift from passive to active infrastructure sharing in order to improve the attractiveness of the investment.
On infrastructure sharing, Nwaulume said the commission was already working on that and has scheduled it for discussion with the operators by the end of next month. He assured that the commission would permit everything needed to ensure continued growth of the telecomm industry.
Fielding questions on how the reserve price was arrived at, he said NCC held a stakeholders meeting on the subject before it was fixed.
He said local environmental issues were taken into consideration and that the pricing is at an average level in comparison.
