Stakeholders decry impact of spectrum prices on mobile market outcome
A recent report by Global System for Mobile Association, GSMA, identified how spectrum prices affect investment and affordable mobile services in developing countries.
According to the report, high spectrum prices may require debt financing, which has a direct impact on the competitive behaviour of a firm and its pricing strategies. In addition, when financed through debt, the cost of spectrum can be annualized in line with the debt repayments, and considered an additional investment, affecting the company P&L and cash available for network investment.
On mobile outcome, it noted that according to the sunk cost argument, spectrum licence fees are sunk costs, and as such should not be taken into account by companies in future decisions (e.g. pricing and investments).
In addition, even if spectrum prices and consumer outcomes show a relationship, it may not be the case that spectrum prices are passed onto consumers, but rather that firms are deciding what to pay for the licence based on the expected future growth and profitability of the market.
Reacting to this report, Engr. Samuel Adeleke, past president, Internet Services Providers Association of Nigeria (ISPAN) urged regulatory authorities to take a look at the success rate of their auctioned spectrum licenses.
“Any regulation that will make businesses to grow or create right environment for success of business and not making money for government should be the focus of NCC and other government agencies,” he noted.
Lanre Ajayi, immediate past president, Association Telecommunications Companies of Nigeria (ATCON), said that making spectrum available is certainly a good idea. It will help in addressing the last mile challenges. But the question is, are the investors confident about our investment climate? I think we need to make our environment more investment friendly in addition to making spectrum available to ensure that we do repeat a situation where we will end up with just one bidder.
Gbenga Adebayo, chairman, association Telecommunications Operators of Nigeria (ALTON) said that spectrum licensing will help to achieve the 30 percent broadband penetration target, but policy will do more towards the targeted 30 percent penetration by 2018.
He said that granting multiple operational licenses to operators does not guarantee investment in that regard, but implementation of well -articulated policies that will encourage operators to invest their money.
He said Government must go beyond granting of licenses to eliminating those barriers such as bottlenecks in securing ‘right of way’, impediments to smooth network operations- where operators are forced to pay levies that are not legalized, and vandalisation.
The report further said: “with increased costs for firms through higher spectrum prices, the mobile market can become less profitable compared to other industries. This can make investing relatively less attractive, leading to underinvestment by domestic and foreign investors in the country’s mobile industry and inefficient allocation of capital across the economy, especially once the wider benefits generated by mobile connectivity are taken into account. Alternatively, firms may try to recover these high costs through higher mobile tariffs”.
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