a beautiful spectrum auction? game theory comes …...a beautiful spectrum auction? game theory...
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A BEAUTIFUL SPECTRUM AUCTION? GAME THEORY COMES TO MYANMAR AS THE PTD DISHES OUT FREQUENCY
Highlights of this note
Game theory-based auction system
What can you bid for?
Who can participate?
How can you participate?
Looking ahead
The crowning piece of Myanmar’s telecom revolution is about to take place. For the first time, the authorities will organize a competitive bidding process for blocks of spectrum. In this note, who can bid, on what, and how John Nash’s game theory comes to Myanmar.
Client briefing note | 19 August 2016
For fans of John Nash’s Nobel prize-winning game theory, highlighted in the motion picture “A Beautiful Mind”, you are about to see theory turn to practice in your very own Nay Pyi Taw, in Building No. 2. On 17 October 2016, the Ministry of Transport and Communications, the new somewhat odd couple of Government ministries, will hold its long-awaited spectrum license auction. The auction follows a public consultation stage that was organized in January and February 2016.
In this note, we look ahead at this potentially game-changing event, at who can participate, and how it will be run.
Game theory-based auction system
The method of the auction is something called “Second-Price Simultaneous, Multiple-round, and Ascending” or SMRA. SMRA is the oldest and probably best-known auction type for spectrum in case of excess demand.
Under the SMRA method, the Post and Telecommunications Department (“PTD”) will auction several blocks of frequency bands in some areas simultaneously, by going through a sequence of rounds. An auction often has several blocks available in a number of regions. In Myanmar, there are three
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Our outstanding expertise in the TMT space is well recognized in Myanmar and throughout our network. The firm’s results-driven, hand’s-on philosophy helps clients to manage the typical licensing and regulatory hurdles MNOs, towercos and vendors face in pioneer markets.
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regions for this purpose. For every round of bidding, the standing high bid for the lot is determined, and the bidding rounds go on until there is only one bidder left for each lot.
For the mathematicians among us, a bidder remains active in round T by submitting the leading bid in T-2 or by submitting a higher bid than the T-1 leading bid. Interested bidders may read up on game theory strategies for spectrum auctions in the Handbook of Game Theory, edited by Petyon Young and Shmuel Zamir.
In practice it means that bidders are kept in separate rooms from 10 am to 5pm and use runners to bring their bids for blocks, per round, to the auction room. Each time that there is excess demand, the PTD’s auction manager (a consulting
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company called Nordicity) will set a “Minimum Acceptable Bid” and a new round will be called with new bids from the separated bidders, unless one or more of them drops out. There may be one hour or less between rounds.
The advantage of this auction type is that it is simple. The problem is that unlucky bidders may end up with blocks of spectrum that do not match together. Bidders may also end up paying quite a bit more than they otherwise would have had to pay. Most importantly, perhaps, there is the possibility of tacit collusive behavior, based on an informal understanding of who should get which spectrum.
What can you bid for?
At this time, the PTD will only auction 40MHz of spectrum in the 2600MHz band (2575-2615 MHz), made up of two times 20MHz (2575-2595 MHz, 2595-2615 MHz) divided into three regions. Each bidder will be able to acquire up to two regional licenses, thus allowing for three to six regional licensees in total.
The spectrum license is for 15 years.
The rules and processes for the 2600MHz auction point out that a bidder will be allowed to “bid for a maximum of one
spectrum lot comprised of up to two regional 20MHz Lots in the TDD mode. Thus the spectrum cap in the 2600MHz band will not exceed 20MHz per licensee in the same region”. In the National Table of Frequency Allocations (“NTFA”), Myanmar has been subdivided into three regions.
REGION STATES and REGIONS INCLUDED
1 Nay Pyi TawMagway BagoMon KayinThanintharyi
2 YangonAyawaddy Rakhine
3 Mandalay Sagain ChinShan KachinKaya
The blocks on the auction table are 2x20MHz, for three regions in the 2575-2615 MHz band. In Myanmar, this band is within the 2535-2655 MHz and has been allocated in the NTFA to “FIXED MOBILE except aeronautical mobile 5.384A BROADCASTING-SATELLITE”.
The NTFA also points out that the band 2500-2690 MHz is intended for broadband services, while the band 2300-2400 MHz will be considered for use by broadband services.
Who can participate?
You need to already have a telecommunications service license; more specifically, an NFS-I license. The NFS-I is the most comprehensive form of telecom license Myanmar has, allowing the licensee to provide services and hold a network.
As of June 2016, these are the companies that have received an NFS-I license:
THE ADVANTAGE OF
THIS AUCTION TYPE
IS THAT IT IS SIMPLE.
THE PROBLEM IS THAT
UNLUCKY BIDDERS MAY
END UP WITH BLOCKS
OF SPECTRUM THAT DO
NOT MATCH TOGETHER.
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Companies issued NFS(I) licenses, as of 13 June 2016
No. Company Name Issue Date Expiry Date
1 Shwe Than Lwin Media Co., Ltd 30 January 2015 29 January 2030
2 Elite Telecom Public Co., Ltd 27 February 2015 26 February 2030
3 Yatanarpon Teleport Public Co., Ltd 27 February 2015 26 February 2030
4 Myanmar Economic Corporation 23 March 2015 22 March 2030
5 Myanmar Network Co., Ltd 23 April 2015 22 April 2030
6 Union Internet Co., Ltd 12 June 2015 11 June 2030
7 Shwe Pyi Tagon Co., Ltd 26 June 2015 25 June 2030
8 F P T Myanmar Co., Ltd 6 July 2015 5 July 2030
9 Fortune International Co., Ltd 14 July 2015 13 July 2030
10 Golden TMH Telecom Co., Ltd 21 July 2015 20 July 2030
11 Myanmar Telecommunication Network Public Co., Ltd 4 August 2015 3 August 2030
12 KBZ Gateway Co., Ltd 4 August 2015 3 August 2030
13 AGB Communication Co., Ltd 27 August 2015 26 August 2030
14 Terabit Wave Co., Ltd 28 August 2015 27 August 2030
15 Southeastasianet Technologies Myanmar Co., Ltd 4 September 2015 3 September 2030
16 Myanmar Country Co., Ltd 6 October 2015 5 October 2030
17 Tah Moe Hnye` Chan Thar Tun Wai Thar Co., Ltd 6 October 2015 5 October 2030
18 Campana Mythic Co., Ltd 14 October 2015 13 October 2030
19 King Royal Technologies Co., Ltd 14 October 2015 13 October 2030
20 Myanmar Technology Gateway Co., Ltd 4 November 2015 3 November 2030
21 Global Technology Co., Ltd 30 November 2015 29 November 2030
22 Fiber Link Myanmar Co., Ltd 31 December 2015 30 December 2030
23 Speed Bird Co., Ltd 11 January 2016 10 January 2031
24 Frontiir Company Limited 25 January 2016 24 January 2031
25 Marga Global Telecom Limited 18 February 2016 17 February 2031
26 Spectrum Life Co., Ltd 28 March 2016 27 March 2031
27 Myanmar APN Co., Ltd 28 March 2016 27 March 2031
28 Bagan ISP Co., Ltd 30 March 2016 29 March 2031
29 Bliss Myanmar International Co., Ltd 30 March 2016 29 March 2031
30 Y Net Public Co., Ltd 30 March 2016 29 March 2031
31 Myanmar Speed Net Co., Ltd 30 March 2016 29 March 2031
32 Kinetic Myanmar Technology Co., Ltd 30 March 2016 29 March 2031
33 Amara Communications Co., Ltd 30 March 2016 29 March 2031
34 Hongsa Telecom Co., Ltd 6 April 2016 5 April 2031
35 China Unicom (MYA) Operations Co., Ltd 20 May 2016 19 May 2031
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RELATED VDB LOI PUBLICATIONS
OUR OFFICES IN MYANMAR
NAY PYI TAW
No. S-204, Tha Pyay Kone Ward Zabu Thiri Township T: +95 678 108 091F: +95 678 108 092
YANGON
Level 8, Centrepoint Towers No. 65 Sule Pagoda Road & Merchant Street, Kyauktada TownshipT: +95 137 1902 / +95 137 1635F: +95 124 1238
Edwin VanderbruggenPartner, VDB loiedwin@vdb-loi.comT: +95 137 1902 +95 137 1635www.vdb-loi.com
CONTACT
Edwin is one of Myanmar’s most prominent foreign legal advisers. He is widely recognized in Myanmar for his TMT experience, both on the transactional and regulatory fronts. He has advised 2 of the 3 telecom operators in Myanmar, including acting as local counsel for the licensing and market entry of a multibillion dollar greenfield telecom project. He advises 5 out of 7 tower and fibercos, and was the first to secure MIC permits for telecom systems vendors.
He has a deep understanding of the financing aspects of the telecom industry, having acted for IFIs, commercial banks or corporate borrowers on all of the completed major project finance transactions, including the largest-ever financing deal acting for two DFIs in Myanmar.
Edwin currently advises several Myanmar telecom operators, ISPs, infrastructure providers, lenders and vendors. Furthermore, he has provided technical assistance to the telecom regulator, the PTD.
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How can you participate?
You must have lodged your Expression of Interest by the deadline of 9 August 2016. Then, interested parties will have
until 7 September 2016 to prepare and lodge their financial, technical and ownership documents for qualification. The qualified bidders will be announced on 28 September 2016. After submission of more paperwork and a Q&A stage, a mock auction will be held on 12 October 2016. Finally, the big day (or days if things get out of hand) will be on 17 October 2016. Winners should be announced by 20 October 2016, but the results will also disclosed in the main auction room right during the auction itself.
By the way, you will also need to arrange for a bid bond of US$500,000 (from a Myanmar-licensed bank or approved by the PTD), and you can’t have any common ownership with Telenor, Ooredoo or MPT.
Looking ahead
If you are not participating in this auction, not to worry. According to the PTD, the following bands could potentially be made available for assignment in the next five years:
• Unassigned portions of the 850/900 MHz and 2100 MHz bands
• 700 MHz • 1800 MHz• 2300 MHz
INTERESTED PARTIES WILL HAVE UNTIL 7 SEPTEMBER 2016 TO PREPARE ANDLODGE THEIR FINANCIAL, TECHNICAL AND OWNERSHIP DOCUMENTS FOR QUALIFICATION.THE QUALIFIED BIDDERS WILL BE ANNOUNCEDON 28 SEPTEMBER 2016.
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