TELECOMS | FG to earn 60% commission from spectrum swap deals

TELECOMS | FG to earn 60% commission from spectrum swap deals

TELECOMS | FG to earn 60% commission from spectrum swap deals

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Federal Government will earn 60% commission when licensees sell telecoms spectrum assigned them in Nigeria under guidelines issued by the industry regulator.

According to the provisions of the rules obtained by Technology Times, a 60% commission will accrue to government when frequency spectrum issued under “administrative process” are sold by the licensees, in one of the key highlights of the new telecoms industry rules.

The issue of spectrum trading came into spotlight this week when the Nigerian Communications Commission (NCC) threatened seven licensees, including Alheri Engineering owned by Dangote Group, which has sold its 3G licence to the number four mobile phone company battling takeover by its creditors, Etisalat Nigeria.

MTN Nigeria and Visafone Limited have also closed a deal in which the latter, a major CDMA operator in the country sold to the bigger GSM operator.

The guidelines stipulate that “for trading of spectrum acquired through administrative process, the seller shall in addition, pay to the Commission 60% of the net proceeds of the transaction.”

 

Technology Times Infographic: Nigeria frequency spectrum sales by numbers

The “Spectrum Trading Guidelines, 2017” issued by the NCC represents the exercise of the telecoms regulator’s powers “to manage, administer and regulate the use of Spectrum for the communications sector”, according to the government agency.

The guidelines stipulate that “for trading of spectrum acquired through administrative process, the seller shall in addition, pay to the Commission 60% of the net proceeds of the transaction.”

The telecoms regulator also appears poised to rein in on spectrum trading in the country as the NCC guidelines will provide “efficient and flexible transfer of spectrum to users who value it most.”

Apart from the 60% cut to the government, applicants that have been granted approval to sell their spectrum will be required to pay an administrative fee representing 1% of the gross proceeds of the transaction to government.

That is not all as the new rules also empowers NCC “at any time after a transaction has been approved, and based on information obtained subsequent to the approval, the Commission shall be entitled to recover from a buyer and/or a seller, any fee that was not paid on a transaction on account of non-disclosure of gross proceeds and/or net proceeds.”

Under the new rules, the regulator also has the right “to take appropriate action which may include among other things, the withdrawal of the approval” even after such an approval has been granted if the licensee was found to breached provisions of Paragraph 5.3 of the Guidelines.

According to provisions of Paragraph 5.3, “The seller and buyer are required to submit written undertakings that they are in compliance with the provisions of the Act, these Guidelines and their respective Licence conditions.”

Also the regulator’s broad powers now allows the government agency to “deviate from these Guidelines if it determines that it would be appropriate to do so in the specific circumstances of any particular case.”

Also the regulator’s broad powers now allows the government agency to “deviate from these Guidelines if it determines that it would be appropriate to do so in the specific circumstances of any particular case.”

Professor Umar Danbata, Executive Vice Chairman at NCC.
Professor Umar Danbata, Executive Vice Chairman at NCC.

NCC outlines several spectrum swap options underway in the Secondary Market, seen as the market for “any tradable spectrum between licensees” to include spectrum leasing, spectrum sharing, spectrum trading and spectrum transfer.

According to the Guidelines, the secondary market trends are defined in the underlisted:

Spectrum Leasing

A Spectrum Trading transaction in which a Licensee sublets a portion of its licensed Spectrum in time, geography or quantum to another Licensee following a commercial agreement approved by the Commission.

Spectrum Sharing

A Spectrum Trading transaction in which a Licensee jointly uses its Spectrum holding right in a Spectrum Licence with another Licensee following a commercial agreement approved by the Commission. The original Licensee retains the Roll-Out Obligation.

Spectrum Trading

A spectrum management transaction which covers any or all of: Spectrum Transfer, Spectrum Leasing and Spectrum Sharing, in which a Seller trades all or some of its Spectrum Licence (rights and obligation) to a Buyer, following a commercial transaction approved by the Commission.

Spectrum Transfer

A Spectrum Trading transaction in which a Licensee reassigns a portion or a whole of its Licence holding on a Spectrum Licence in time, geography or quantum to another Licensee following a commercial agreement approved by the Commission.

Meanwhile, to play in the secondary market for spectrum transaction, the rules now requires licence holders to meet the following conditions:

  • The buyer is a licensee of the Commission. Where an intending buyer does not have the requisite individual operating licence that permits the deployment of access spectrum, it will be required to obtain one before it can acquire the spectrum.
  • The Board of Directors of the seller and buyer have passed resolutions consenting to the transaction. These resolutions shall be submitted to the Commission together with an application for spectrum trading.
  • The seller has held the spectrum for a minimum of 2 (two) years.
  • Where applicable, the seller must have achieved at least 25% of the roll-out obligation specified in the spectrum licence.
  • Any spectrum licence that is to be traded must still have a validity period of at least one year before the expiration of its tenure. Based on the above, spectrum licences that have a one year tenure are not eligible for trading.
  • Both the seller and buyer must be in good regulatory and financial standing with the Commission.
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