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Butan: Spectrum auction November 15, 2006

Posted by Jasper in Mobile.
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According to TeleGeography, Bhutan’s telecoms regulator is preparing an auction process for the country’s second national mobile operator. There are some unusual aspects to this process.

First, under the auction rules current monopolist B-Mobile must match the winning bid in order to renew its own license, which expires next July. B-mobile is wholly owned by state-owned fixed line operator Bhutan Telecom and has so far been leasing wireless spectrum and has not had to pay for its concession. Hence worries have been raised that it may struggle to meet the financial demands. I think not. If it does, there is something very wrong in the market or with the auction mechanism.

Second, the auction will start by firms (there are currently four who have shown interest) submitting sealed bids, the highest of which will become the minimum price for the second round, and this will be conducted as an open auction. Why have sealed bid round if you are going to have open auction afterwards? The bidders have no incentive to bid anything in the first round. Something close to zero will do. The competition will only begin once the open cry auction is underway.

Third, in order to try to limit the price of the new 15-year license, the regulator – Bhutan Infocomm Media Authority (BIMA) – is requiring bidders to pay at least 51% of the license fee from their own funds; the remainder can be paid with the help of financial backers. Why try and limit the price in this way unless you are trying to protect the incumbent.

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