billion. That’s how much the British Government earned from their
auction of cellular frequencies last month. Germany’s auction, planned
for July, is expected to raise $50 billion euro (US$45 billion), on the
assumption that it will attract roughly the same bid per cell-phone user
as the British sale. Even Morocco, poor as it is, earned US$1.1 billion
from the sale of a single cellular license. This move, says The Economist,
is “helping Morocco leap-frog generations of development. Investors say
the speed and transparency of Morocco’s telecom reforms are unparalleled
in the Arab world.”
everywhere from Egypt to the US, are successfully auctioning cellular
licenses for substantial sums of money. Why not us?
UK cell market consists of 56 million people with a per capita income of
some US$17,000 dollars. Work the numbers backwards to Trinidad and Tobago
and you end up with our licences being worth US$200 million. Even if it is
worthless it is a hell of a lot more than nothing, and will go to the
people’s treasury instead of the pockets of a few well placed companies.
of what we could do with US$200 million. Nurses could be paid; schools,
hospitals, furnished; jobs created; infrastructure built; drug trafficking
fought. Think of what it could do for those without a safety net - the
elderly, the ill, the poor, the youth, the children, the disabled.
could go towards sustainable development: help bridge the yawning menacing
gap between the rich and the underclass; fight poverty and illiteracy that
is waiting to explode in our faces in the ugly guises of racial tension
experience with the sale of national telecommunication assets (including
cellular frequencies) in Caricom has come from Guyana and Jamaica. Guyana
sold its telephone company for US$15 million, and in two years time it was
worth US$150 million. Unfortunately, the profit went to a single foreign
company rather than the people of Guyana.
Jamaica, the one place where auctions did take place it was botched up by
lack of experience, and had only themselves to blame for not doing their
homework before signing on the dotted line.
Cable and Wireless bought 49 per cent of TSTT’s shares in the 80’s,
the Government signed a contract which gave TSTT monopoly rights until
2010. Minister of Public Utilities Ganga Singh confirmed that we too are
attempting to renegotiate our position with C&W for the obvious
reasons - improved or cheaper services (or a combination of both) to the
benefit their people and businesses.
has succeeded in breaking the monopoly for cellular licenses and invited
submissions for proposals and should be lauded for that. The arguments
raised against auctioning our cell licenses are either not valid or are
can be dealt with. Here are some possible solutions:
provision - Unlike water and electricity, there is no reason to demand
universal provision for cellular phones. Why is it necessary for every
person in Trinidad and Tobago to have a cell phone?
coverage (the ability to use cell phones anywhere) - Any company that does
not provide wide coverage will automatically cut themselves out of part of
the cellular market since clients will want to use their phones
everywhere. It is basic business sense to provide as wide a coverage as
government wishes to set high performance standards or put a cap on charge
rates. In such a case, the government can state these criteria publicly
and allow bidding to go ahead with all the participants agreeing to the
criteria before hand. We may raise slightly less money but we will still
get more than a tax pittance.
agree with Govern-ments wish to support the growth of a strong local
cellular industry. Other than the fact that we already have TSTT as a
national champion, the solution is to reserve one of the three or four
licenses to be auctioned to local companies, and open the auction of the
remaining licenses to both national and foreign companies.
point that cellular systems are embryonic here in Trinidad and Tobago
simply does not hold water. Cellular phones are nothing new. Ask the
40,000 people already with cellular phones. In fact, we have second
generation cellular equipment (Digital) and we hope that the licenses are
for third generation systems (Internet compatible). We do not want people
dumping their used second generation equipment here in Trinidad and
cellular business is a hugely successful business worldwide from South
Africa to the US. No cellular companies are going bankrupt. On the
contrary the cellular company valuations are going through the roof. The
size of the market doesn’t matter. Those against it say our local
companies simply cannot put up huge lump sums required for auctions. But
according to Minister Singh all shortlisted companies are operating as
joint ventures with the big boys, eg AT&T and Bell, so they have
access to big funds.
company’s who are bidding put a value on the cell market. If UK
companies felt they could spend US$32 billion and make money, and the UK
government handed the licenses to them (as we propose to do) those same
companies would be US$32 billion dollars richer and UK Government that
successful bidders be sucked dry in an auction? The Economist says “the
answer is that bidders themselves are the best judges of what the licences
are worth. If, during the auction, they had thought that they could not
win a licence without making a loss, the solution was obvious: drop out.
Granted, the companies may miscalculate: competition may be so fierce that
they cannot charge enough for their services to recoup the cost of their
bids. But that is their problem. And if a mobile-phone company cannot make
money, or goes bust, it can always sell its licence.”
of the view that cellular companies will be crippled by the sums that
bidders have to pay? The Economist says “it is not clear why that should
transpire. One might instead argue that companies will have to strive
harder and invest more than they would have had they been given the
licences free, because of the pressure to recoup their bids.” We do not
need to provide windfalls to the AT&T, Bells, the Neal and Massys and
Gillettes of this world. If these companies can’t do their calculations
right then they should drop out.
the objection that auctions will jack up prices for customers, the obvious
solution is to allow four or five companies to operate under a regulator,
and the competition will push prices down. Worldwide now, cellular
companies who went the way of auctions are giving away phones and free
talk time if you hook up with them. In many countries, such as Malawi and
Morocco, offers from the cellular companies are so good they become
cheaper than land lines. This may even force TSTT to provide better
service in the regular telephone market.
is no reason our cellular licenses cannot be auctioned, raising money for
us rather than giving it away to rich companies. Paul Klemperer, the
Oxford economist who was the principal theorist behind the British
mobile-phone auction, says auctions can be designed to suit the size and
needs of any country. We can get experts like him to help us.
has already demonstrated its commitment to break monopolies. There is
another monopoly in the telecommunications sector that needs to be
auctioned: Cable. All six of which in T&T are owned by Open
Telecommunications. Major decisions regarding our collective resources
should not be “way down the pipeline” Peter Gillette CEO of Open
Telecom says, without the consensus of the people.
take no issue with Peter Gillette, or any other company being awarded a
license, conflict of interest or not, as long as they are willing to pay
Government what its worth. What I resent on behalf of the people of this
country is that we are being treated as if we are stupid. We are not. Our
choice is simple. Do we want a US$200 million dollars for our national
assets - ie cellular frequencies - or do we want a trickle of tax money
while a few local and international companies pocket huge profits? I say
give us our lump sum now. We trust our Government to make good use of the
money to our benefit since we put them there.
first step towards this is by putting out a green paper listing our
criteria to bidding companies, opening up the discussion, and only then
allowing them bid. Beginning with US$200 million. Going, going...