Despite significant spending by South African mobile operators in the 2022 spectrum auction, the country remains one of the world’s most cost-effective regions for acquiring mobile spectrum, according to a new report by the global mobile industry association, the GSMA.
The report highlights that, globally, the average cost-to-revenue ratio for spectrum acquisition surged by 63% between 2014 and 2023. In South Africa, this ratio doubled over the same period, rising from 1% to 2%. The increase has been largely driven by spectrum acquisitions necessary to deliver 4G and 5G services to consumers.
“The trend of rising spectrum costs is evident across all regions, with some markets experiencing a tripling in cumulative spectrum expenses,” the GSMA stated. “Between 2014 and 2023, operators worldwide spent a total of approximately $0.5 trillion (around R9 trillion) on spectrum.”
At South Africa’s 2022 spectrum auction, regulator Icasa raised R14.4 billion, with Vodacom and MTN emerging as the largest spenders, committing R5.4 billion and R5.2 billion respectively.
By comparison, India’s cost-to-revenue ratio doubled from 14% to 28%, making it one of the most expensive markets globally. Colombia and Argentina, while maintaining relatively low ratios of 8% and 10%, have seen significant increases from just 2% in 2014. Japan and China continue to enjoy the lowest spectrum acquisition costs worldwide, at about 1% of annual revenue.
The GSMA attributes these differences primarily to regulatory approaches. Japan and China mainly rely on annual fees set to ensure efficient spectrum use and recover regulatory costs, whereas some countries use spectrum auctions to generate government revenue — costs that can ultimately be passed on to consumers.
Although spectrum acquisition costs have increased in many countries, GSMA data reveals that operator revenue per megahertz of spectrum has declined globally. This decline results from falling average revenue per user (ARPU), as data services grow but often cannibalize higher-margin voice services.
“Consumers now pay less for mobile services than a decade ago,” the GSMA noted. “Yet, operators need more spectrum than before to support the increasing data throughput per user.”
Interestingly, the average price per megahertz for low-band spectrum (sub-1GHz) has dropped by 75% since 2012, despite these frequencies’ value due to scarcity and propagation characteristics. Prices for higher-frequency bands have converged over time, with millimeter-wave spectrum (>24GHz) costing less than 1% of low-band prices.
The report also raises concerns over telecom infrastructure investment amid declining revenues. Lower returns discourage operators from expanding and optimizing networks, potentially resulting in limited coverage and slower speeds. This is particularly critical as 5G technology demands more spectrum and denser base station networks.
Operators in developed markets such as Europe and North America, which pioneered 5G deployment, have struggled to recoup investment costs, leading to hesitancy in less-developed markets like sub-Saharan Africa to fully migrate to 5G.
Telkom Consumer CEO Lunga Siyo echoed this sentiment in a July 2024 interview, stating that charging customers more for 5G services is difficult when 4G networks already meet most consumer needs. “Premium pricing may be possible only in specific sectors where 5G private networks create distinct value, such as mining or manufacturing,” he said.
The GSMA stressed the critical role of regulators in setting spectrum prices that encourage network expansion rather than hinder it. “Policy decisions are a major determinant of spectrum costs for operators. Regulators aiming to maximise spectrum’s social value should adopt pricing approaches that avoid undue negative consequences,” the report concluded.
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