A large number of Nigerians may be unable to access 5G network services due to the high cost of the 5G licence while smaller operators may also struggle to afford the fee, BusinessDay reports.
Despite the limitations of the pricey license fee, operators are divided on whether it would affect the viability of the technology when it is launched in 2022.
MTN, the largest telecommunication operator in the country has already conducted a successful trial of the technology with the help of Huawei, ZTE, and Ericsson. The NCC said it has also approved a trial exercise for Airtel which could happen before the end of the year according to reports. The two telcos are projected to be the first to secure the licence.
Apart from being foreign-owned companies operating in Africa’s largest economy, they are also the only two telcos publicly listed companies in Nigeria. Experts say this puts them in a better position in terms of liquidity for the ten-year licence.
Adebayo Gbenga, President of the Association of Licenced Telecommunication Operators of Nigeria (ALTON) says at N75 billion the price could be seen as prohibitive for smaller telecom operators that do not have the type of liquidity that telcos like MTN and Airtel command.
“It could then mean that local companies are shut out of the market, effectively making foreigners the custodian of the technology in Nigeria,” Gbenga said. “The local companies may not have the access to funding that MTN and Airtel possess.”
The implication of the N75 billion licence is that on a yearly basis, the operators would likely have to include about N7.5 billion in their annual budget for the next ten years. This is aside from maintaining other legacy infrastructure and overheads.
Supporters of the planned licence fee say it is not far-fetched given that it is even lower than the price across the world. What they forget however is the superior market conditions in those other countries compared to Nigeria.
In the United Kingdom, where 5G licence was auctioned in 2018, four operators paid almost £1.4bn (N779 billion) to secure their 5G licences. Vodafone won 50MHz of spectrum in the 3.4GHz frequency band auctioned paying £378m (N210 billion), BT-owned EE won 40Mhz paying £303m (N168 billion), Telefónica-owned O2 picked up 40MHz for £318m (N176 billion), and Hutchison-owned Three spent £151m (N83 billion) on 20Mhz.
In 2020, the US Federal Communications Commission announced that bidders have bid $80.9 billion on 280 megahertz of airwave licenses, or spectrum, in what’s referred to as Auction 107. At the end of the auction, 28 companies secured 3.4GHz worth of the country’s airwaves. Verizon, spending the most money to license the most bandwidth, paid just over$3.4 billion for 4,940 licenses.
Some experts see acquiring a licence as a strategic necessity. MTN and Airtel, for example, account for 65.6 per cent of the market in Nigeria, hence it would make sense that they pick up the licence for 5G. Moreover, they are also at the forefront of the mobile money market across Africa which not only guarantees them extra revenue but motivation to be part of a network that further eases transactions at record speed.
A 2021 report by the GSMA found that spectrum licences being sold for extremely high prices is becoming common around the world. However, it describes the situation as worrying given the impact high prices have on consumer mobile services and the wider digital economy. For example, the Minister of Communications and Digital Economy often anchors the need for 5G technology on achieving the lofty ambitions of the digital economy. However, the GSMA argues that the high prices don’t take into consideration the local realities in developing countries like Nigeria. In most cases, spectrum prices are on average three times higher than in developed countries once income is taken into account.
This is largely why the coverage of previous cellular networks like 3G and 4G is not as widespread as should be expected. 3G coverage as of 2020 was at 49.4 million, a decline compared to 50.4 million recorded in 2019. 4G coverage in Nigeria is at 36.5 million in 2020 from 21.7 million reported in 2019.
“The cause of extremely high prices are typically policy factors that appear to prioritise other factors, such as maximising short term state revenues, above long-term support for the digital economy through improved mobile services. Key concerns are when regulatory authorities fail to make sufficient amounts of mobile spectrum available, which creates scarcity thus inflating prices, or setting excessive auction reserve prices, final prices or annual spectrum fees,” the GSMA report notes.
At a meeting with stakeholders in September 2021, Umar Garba Danbatta, the Executive Vice-Chairman (EVC) of the Nigerian Telecommunications Commission (NCC), told operators that the 5G operating licence would cost between N75 billion ($182.1 million) to N100 billion ($242.9 million) for the ten-year licence.
The Nigerian government plans to benefit from an extremely high price licence regime. In September, the senate mandated the NCC to take advantage of the National Policy for Fifth Generation network, to generate N350 billion for the federal government in the 2022 fiscal year. The senate says the revenue from the spectrum would be included in the commission’s 2022 budget.
“We are proposing about N350 billion. This is because there must be a projection for the sale of the spectrum following the launch of the 5G network,” said Solomon Adeola, chairman of the joint committees working on the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper.
