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30.11.2015 Press Release

NCA’s Commitment To Local Participation Within The Communications Industry

By NCA
NCAs Commitment To Local Participation Within The Communications Industry
30.11.2015 LISTEN

In spite of the recent loud and widespread outcry by the newly formed Ghana ICT Chamber against the move by the National Communications Authority (NCA) to do an open auction of two blocks in the 800MHz spectrum, the NCA is going ahead with the scheduled calendar towards the auction as slated for December 3 – 8, 2015.

Ahead of the actual auction, the NCA has invited all the four applicants, MTN Ghana, Surfline Communications, Goldkey Telecoms and Migson Communications to an orientation session on Monday, November 30, 2015 at 2pm. The orientation session will enable the independent auctioneer, KPMG, do a full briefing of the auction process to the participants and to ensure that the auction procedures, as already prescribed by the NCA, are followed to the letter.

The 800MHz spectrum became available for broadband telecoms service because of the global migration from analogue to digital television systems. That spectrum was originally prioritized for television broadcasting, but as part of the transition, the International Telecommunications Union (ITU) has re-prioritized it for broadband telecoms service. Ghana is therefore in the process of auctioning that spectrum to telecom operators in the country to improve on their service quality for the benefit of all Ghanaians.

The NCA had earlier explained to industry players that its decision to “openly auction the 800MHz spectrum [and any other resource for that matter] is consistent with Section 58(8b) of the Electronic Communications Act, 2008, Act 775.” Section 58 of the Act is on “Spectrum”; and Subsection 8b states that “The procedure referred to in subsection (3) may include granting the authorization for the use of the frequency band through auction.”

The Subsection (3), which was referred to in Subsection (8), also states that “The Authority shall allocate the uses of the spectrum of the electronic communications sector in a manner that promotes the economic and orderly utilisation of frequencies by electronic communications networks and services.”

Even though the decision to do an open auction was within the law, the NCA did not rush the process. It allowed room for broad public consultation, which begun way back on May, 2015. By the close of the public consultation period, there were nine responses, four of them from existing telcos. However, only MTN has put in a direct bid for the new 800MHz spectrum.

Background

It is important to note that prior to this whole process, and within the dictates of the law (ACT 775), three wholly Ghanaian-owned companies, Surfline, Goldkey and Blu Telecoms were exclusively given Broadband Wireless Access (BWA) licenses within the 4G-compliant 2600MHz spectrum for as low as US$6million each three years ago. On that occasion, the existing 3G telecom operators were excluded from the offer which sought to give Ghanaian companies a head start in the 4G LTE space.

To increase local participation within the industry, the licensing conditions were that only up to 30 per cent shares in those licenses could be offloaded to foreign entities, if the licensees so wished. So by law, 70 per cent of the ownership of that spectrum has been reserved for Ghanaians. Interestingly, only two of the three Ghanaian licensees have taken off, with Goldkey beginning its test operations recently.

To refer to the NCA’s Request for Application document, the objectives of the spectrum auction are to:

• To make valuable spectrum available for the provision of mobile services to improve access and service quality whilst facilitating the diffusion of information and communication technologies in enhancing the socio-economic development of the country.

• To generate revenue for the State to cover some of the costs of the transition from analogue to digital broadcasting including the cost of rolling out a nationwide DTT network to carry programme channels of the state broadcaster and other private Free-to-Air (FTA) terrestrial TV stations.

• To provide a means of growth for existing internet data service providers and to facilitate the attainment of universal access to internet data services and

• To provide opportunities for participation by indigenous Ghanaians in the telecom industry.

These objectives which seeks to improve access to enhance the development of the country is critical. Do we as Ghanaians sit and wait for the BWA licensees on this regarding their snail paced roll out? It is important to note that even as this auction process seeks to empower consumers in the future with choice and access to service for the ultimate benefit of Ghana, the government of Ghana, through the NCA has ensured that local participation in the industry is protected.

In addition, the spectrum auction also seeks to offer spectrum to industry players who can afford to provide 4G services on a mass scale so that Ghanaians could have easy and affordable access to 4G. As stated above, the move to do open auction is within the law.

The main concerns of the BWA licensees, as captured by the NCA, were as follows:

a. BWA licensees supported Government’s indigenous empowerment objectives in the telecom sector.

b. BWA licensees seek to be protected in the intended license process.

c. BWA Licensees sought a review of the current limitations on their operations i.e. voice services and coverage obligations with 2600MHz spectrum which is best suited for city deployments.

They contend that the 700MHz and 800MHz spectrum would help them meet their coverage obligations.

In response to those concerns, the NCA duly assured them that their request for review of some limitations in their existing licenses shall be addressed as part of consultations in 2016. The NCA furthermore did not and still does not agree with the train of thought that the 800MHz should be given exclusively to the BWAs.

Recent Outcry by ICT Chamber

The key issues raised by ICT Chamber last week are as follows:

1. That the spectrum should not go to MTN because if it did, the opportunity to use the most valuable national asset to develop the local ICT sector would be have been lost.

2. That MTN may have invested in Ghana and provided jobs in Ghana, but giving them the spectrum for 15 years will lead to a repatriation of revenue that would mean they will recoup their investment and make over 70% profits within the 15 years.

3. That 4G technology is the opportunity to create a Ghanaians consortium, which when supported, could grow and become Ghana’s own MTN in the future.

4. That the spectrum should be given to a local consortium [represented by the ICT Chamber and including Goldkey and Surfline] so that they will give capacity to all telcos, including MTN and Vodafone to ensure affordable 4G for all Ghanaians.

5. That given the opportunity that the 800MHz provides, including the fact that it allows the winner to provide voice services, Surfline can rollout across the country [just like the other telcos have].

6. That since the sale of the 2600MHz spectrum created Surfline, Blu and Goldkey, Surfline is currently moving more data than five of the six 3G networks in the country.

The ICT Chamber is therefore proposing that the spectrum should be given to a proposed consortium, which includes Surfline, Goldkey and Blu, at a cost of US$83million, which meets government’s budget for the full implementation of the digital migration project.

NCA’s Commitment to Local Participation

The ICT Chamber is simply looking for indigenization of the spectrum. Indeed the first BWA licenses were indigenized, and the conditions are that Ghanaians should keep at least 70 cent of the ownership, reaffirming local participation within the industry.

Even though 800MHz spectrum is about to be auctioned, there is a condition that any foreign entity, including MTN, must prove that a minimum of 35 per cent of the license is in the hands of Ghanaians, failing which the lifespan of the license will be reduced on a continuing basis yearly.

This could be either by getting local partners, or by doing open or private placement of shares on the local Stock Exchange. But what is important is that they are required by law to offload 35 per cent shares to Ghanaians if they won the license.

MTN has over 15 million customers in the country and employs over 500,000 Ghanaian directly and indirectly. It has invested over US$3billion in the country and continue to do so. Indeed, its pursuit of this new spectrum is testimony of its commitment to continue to invest within the communications industry.

Again, there are two blocks within the 800MHz on auction. The rules as set out by the NCA means no one participant can win all two. MTN can therefore win only one of the blocks on offer. The other block remains available for the two members of the ICT Chamber, Surfline and Goldkey, and the fourth participant, Migson Communications to run for. The ICT Chamber’s consortium had a pretty good chance of applying for one block within the timeframe set, however, it chose not to do so.

Protection

The ICT Chamber also asked for protection for the local investors. The law makes it clear that that spectrum should be used efficiently and does not limit the use of the spectrum to only Ghanaians. Indeed this is the practice in many other countries. As such, NCA is acting within the law, and is therefore under no obligation to protect any company, but to ensure a judicious use of the spectrum, which is a finite resource.

Indeed, it was in the interest of protecting new local entrants into the telecom industry that the NCA gave out the first three BWA licenses for way less (US$6million) to only Ghanaian-owned companies and gave them three years head start before finally deciding to bring in the other players. There is no record of any promise by government to protect the locals until they recoup their investment and make “handsome returns” as the ICT Chamber suggests.

Till date, only Surfline has rolled out in Accra, Tema and Takoradi, Blu is still in the process of rolling out in Accra while Goldkey has only recently begun its test operations.

The ICT Chamber suggests, without showing any comparative evidence that Surfline currently moves more data than five of the telcos in the country. The NCA, as the industry regulator, would appreciate receiving a copy of the evidence that the ICT Chamber has on this including how it determined and arrived at such a conclusion.

The ICT Chamber also suggests that the telcos have not fully deployed 3G spectrum but MTN is asking for 4G spectrum. In response to this, the following questions remains to be asked, should we wait for the BWAs to roll out 4G at their own pace when the world is thinking of 5G now? What about consumers? Should their right to improved services be held at bay?

Moreover, the telcos pay one per cent of their operational profits to the Ghana Investment Fund for Electron Communications (GIFEC), to provide the infrastructure to unserved and under-served areas so that telcos could provide coverage to those area in a more affordable way. The ICT Chamber should be interested in finding out how they can utilize the infrastructure GIFEC has in place to their benefit.

Conclusion

There is no doubt that NCA did give local companies the head start in the 4G space; there is no doubt that the NCA has ensured local participation by asking for a minimum of 35% Ghanaian ownership; there is no doubt that the NCA has promised to, in 2016, take a look at the BWA licensees request for an adjustment in their licenses to allow voice service immediately; there is no doubt that NCA is acting within the confines of the law and in the interest of the greater majority of Ghanaians in doing the open auction of the 800MHz spectrum.

This NCA believes that with the industry has far to go to support Government in its developmental agenda and this can be achieved with the partnership of both local and foreign based investments. We believe that our local BWAs are part of this transformational agenda and we believe that the rights and choice of the consumer, should above all interests be considered. We wish all applicants, including Surfline and Goldkey, the best of luck for the coming auction.

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