Israel launches 5G auction

The Israel Ministry of Communications has published the tender for award of frequencies for 5G mobile networks. The frequencies will be awarded in an auction, using the CCA format (Combinatorial Clock Auction) with the second highest bid price rule (Vickrey auction).  The total spectrum available in the auction includes 2×30 MHz FDD in the 700 MHz band, 2×60 MHz FDD in the 2,600 MHz band and 300 MHz TDD in the 3,500-3,800 MHz. For the first time, a tender for award of frequencies will be accompanied by an incentive system that includes grants and a reduction in spectrum fees in the total amount of NIS 500 million.

For the first time, a tender for award of frequencies will be accompanied by an incentive system that includes grants and a reduction in spectrum fees in the total amount of NIS 500 million. The Ministry of Communications and the Budget Division of the Ministry of Finance have formulated a system of incentives that will be integrated into the tender. The incentive system is designed to promote accelerated deployment of networks. The incentive system is based on two pillars:

  • Reduction of spectrum fees – upon meeting the construction and operational targets, operators will get a discount of 28% of the total frequency fees for the period of 4 years. The operational targets include operating a minimum bandwidth of 45 MHz and activating VoLTE.
  • Grants in the amount of up to NIS 200 million – operators will be required to complete 250 base stations for 5G networks until the end of 2021. The grant incentives according to how the operators meet the target will be the following : the operator completing 41 percent of the base stations can get a grant of NIS 82 million; the operator completing 33 percent of the base stations  will get NIS 66 million; and the operator commpleting 26 percent of the base stations will get NIS 52 million.

The payments for the spectrum won in the auction will be deferred to 2022 in order to enable the operators to direct their financial resources to invest in upgrading the networks.

The tender will be conducted in three stages:

  • the stage of joint proposals – applies only to operators with a shared network;
  • the stage of submitting individual bids;
  • the financial pricing process that includes a dynamic pricing process and a static pricing procedure, assigning the winners and determining payments.

The payments for the spectrum won in the auction will be deferred to 2022 in order to enable the operators to direct their financial resources to invest in upgrading the networks.

The tender will be conducted in three stages:

  • the stage of joint proposals – applies only to operators with a shared network;
  • the stage of submitting individual bids;
  • the financial pricing process that includes a dynamic pricing process and a static pricing procedure, assigning the winners and determining payments.

Required guarantee will amount to NIS 10 million for an established operator and NIS 7 million for a new operator.

The available spectrum to be awarded in the auction will be as follows:

Spectrum band (MHz) Total available spectrum (MHz)   Block (MHz)   Number of blocks Auction part Open/Closed
700 (I) 2×25 2×5 5 Closed
700 (II) 2×5 2×5 1 Closed
2,600 (I) 2×40 2×10 4 Closed
2,600 (II) 2×20 2×10 2 Closed
3,600-3,800 200 20 10 Closed
3,500-3,600 100 10 10 Open

In the open part of the tender, each entity will be able to compete for 100 MHz in the 3,500 MHz band, provided that it meets the threshold conditions, i. e. presenting shareholder’s equity in the amount of NIS 30 million or 20% of the construction costs; and a technical and business plan for providing 5G services using the spectrum.

Photo Copyright: Adobe Stock | JEGAS RA

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