Abstract
The rise in the global use of mobile services has brought about an increase in the demand for spectrum. Spectrum is an important input into the provision of mobile telecommunications services. Due to the scarcity of this resource, regulators strive to award licenses to mobile operators who will use spectrum most efficiently and enhance the social benefits to their end-user. Key to achieving efficient outcomes, is the way the spectrum auction is allocated. This study applies a comparative case study approach to analyse how three countries in emerging markets (Ghana, Nigeria, and Tanzania) designed their spectrum auctions as a mechanism for allocating spectrum and what the outcomes were post-auction with respect to competition in downstream retail mobile markets of the respective countries. It draws on secondary data about auction design, policy objectives, firm performance, and market outcomes such as data prices and market shares before and after an auction process in each country.
The study found that the spectrum auctions did not meet their objectives due to the design. The regulators in the respective countries did not take the context or the macroeconomic dynamics of the country into consideration when designing the auction. The study revealed that there was a lack of participation in the auction by the smaller operators due to high reserve prices and onerous coverage obligations. It was found that where the spectrum auction design prioritized revenue maximisation over the efficient allocation of spectrum, valuable spectrum was left unsold. Prioritising revenue maximisation also led to future policy issues by creating first-mover advantages for lead firms in certain segments of the market.
The findings show that although the post auction outcomes may be positive in relation to market shares and price data, the positive changes were not directly attributed to the spectrum auctions. In general, the operators that gained market shares did not acquire any spectrum in the auction, except for MTN Ghana. This may indicate that high reserve prices precluded potentially disruptive firms from acquiring spectrum. Finally, the study found that in Ghana, MTN’s market shares increased substantially most likely due to it being the only firm to acquire 4G spectrum, leading to it having first-mover advantages in the 4G market segment.