Nigeria's 5G auction sets stage for telecoms’ future

Nigeria is on track to auction more 5G licences, setting the scene for the future of its telecommunications industry amid the push by a growing number of countries to phase out older networks.

In its first-ever 5G auction in 2021, the Nigerian Communications Commission (NCC) raked in over $500 million as MTN Nigeria and Mafab Communications emerged winners and set off a new era of high-speed telecommunication in the country.

One year after, the commission is getting ready to auction the last two lots of spectrum licences at a reserve price of $273.6 million, and it has eager telecommunication companies waiting to snap them up. Apart from Airtel and Eutelsat/Intelsat/CES, MTN is also eyeing a second 5G licence. This could potentially see the price of each of the remaining lots go as high as $300 million, making it the most expensive 5G licence in Africa.

During the NCC Stakeholders Forum on the Draft Information Memorandum on November 15, some stakeholders openly opposed the move by MTN to secure a second licence ahead of operators yet to get one. Their objection is on the premise that the NCC should be levelling the playing field to ensure fair competition.

On November 18, 2022, the NCC released the final copy of the Information Memorandum (IM) for the 5G auction, which, among other things, gives the green light to MTN’s ambition for a second spectrum for its operations in the country.

According to the NCC’s final IM, any licensee of the commission or any entity that has up to 200MHz in the 3.5GHz band in Nigeria will not be eligible to participate in this Auction. This technically permits MTN to be part of the auction, given that it currently possesses only 100MHz in the 3.5GHz band.

At the 2021 auction, MTN selected Lot 1, also known as Lot B (3500-3600 MHz), while Lot 2 (3700-3800 MHz) was consequentially assigned to Mafab Communications Limited.

The spectrum that will be auctioned in December includes Lot A (3400-3500 MHz) and Lot C (3600-3700 MHz).

According to MTN, the original equipment manufacturers of 5G equipment often produce two lots, not one. That could mean either A and B or B and C. The telco says having a licence for two lots provides easy access to the necessary equipment it requires for effective deployment and it makes the cost of the service cheaper for consumers.

Ikenna Ikeme, general manager, regulatory affairs at MTN, said the company had entered the last auction in 2021 with the expectation that it was an open market and it would be allowed to participate in other auctions should the need arise.

An industry expert told BusinessDay that the move by MTN to acquire a second spectrum is not necessarily based on having maximised the first licence it acquired. The use case for 5G in Nigeria is not yet pronounced. The country lags behind on many big tech innovations like machine learning, robotics, artificial intelligence, big data, and the internet of things.

But MTN already has the first-mover advantage, being the first telecom operator to launch commercial 5G in Nigeria. Mafab Communications is still putting together its structures and is expected to launch in January and risk losing the licence.

Future of 5G licence ownership

The market realities of 5G may also support MTN’s bold move. For example, it has been found that wider channels – above 100MHz – confer some advantages. First, it lowers network density and this is an important factor in determining the cost of 5G services to consumers.

However, it also has other advantages including fewer base station sites and lower environmental impact. The number of sites is inversely proportional to channel bandwidth: narrower channels mean more sites. Decreasing channel size from 100 MHz to 60 MHz in the 3.5 GHz range will require increasing the number of cell sites by 64 percent.

“Wider channel bandwidths, which do not rely on these techniques, also allow for lower power usage. In the first instance, this will lower the carbon footprint of mobile networks2, but in cases where consumers have sporadic access to electricity it is vital to their continued access to connectivity,” GSMA noted in its report.

The ownership of 200MHz in the 3.5GHz also ensures MTN is a critical player in the future of connectivity. It is no longer news that many countries are at various stages of their plans to phase out older networks such as 2G and 3G.

By October 2022, 142 operators in 56 countries have either completed, planned, or are in progress with 2G and 3G switch-offs, according to Global Mobile Suppliers Association 2022. Of those 51 operators have been completed already, 97 are planned, and eight are in progress.

While Africa is the only continent where no 2G or 3G shutdowns have been announced so far, operators in South Africa are already planning to do so at least by 2025. Experts say other countries on the continent will catch up once newer technologies penetrate more. The implication for any telco without 5G licence is dire: either get acquired or die, said an industry stakeholder.

3.5GHz as the launch band

The 3.5GHz band is considered the launch band for the 5G network and it has been used by most networks globally for initial services. In nearly all cases, each operator starts off with 100MHz channels to maximise network performance while minimising consumer costs. Experts at GSMA agree that operators would naturally require an increase in the harmonised spectrum available to maintain growth in subscribers and speed.

“However, global harmonisation within the band 3.3-4.2 GHz is limited, with only a small portion of 200 MHz at 3.4-3.6 GHz having near-global harmonisation. Regional groups and individual countries have overtaken this,” a report by GSMA noted.

Nigeria has four lots of 100MHz in the 3.5GHz band, representing a total of 400MHz. Should the odds turn in MTN’s favour at the December auction, the telco will have 200MHz, half of the total 5G licences the country has, leaving it as the clear leader of the market with only two competitors, Mafab Communications and whoever wins the remaining lot in December.