Question 1: The level of the annual spectrum fees
Is there a minor error in the Information Memorandum regarding the annual spectrum fees? It appears that:
”As an example in 2018 the fixed component will be DKK 600 per licence, and the variable component of the fee will be DKK 56,405 per MHz for the licences. Thus, the total annual spectrum fee in 2020 for a licence consisting of 2x10 MHz is expected to be DKK 1,128,100 and for a 2x5 MHz licence it is expected to be DKK 554,050. The spectrum fees are also published on The Danish Agency for Data Supply and Infrastructure Agency’s website."
Is the price for FDD frequencies (cf. the examples with 2x10 MHz and 2x5 MHz) under 1 GHz twice of what appears in the text? The price should be correct for 2300 MHz, however you don’t use 2x.
There is an error in the examples in section 3.10 of the Information Memorandum regarding annual spectrum fees. The Danish Agency for Data Supply and Infrastructure will publish an updated version of the Information Memorandum on the website, where the examples will be corrected so that the following will appear:
”As an example, in 2018 the fixed component will be DKK 600 per licence.
The variable component of the fee will be DKK 112,811 per MHz for the licences in the 700 MHz and 900 MHz frequency bands. Thus, the total annual spectrum fee in 2020 for a licence consisting of 2x10 MHz is expected to be DKK 2,256,220 and for a 2x5 MHz licence it is expected to be DKK 1,128,110.
The variable component of the fee will be DKK 56,405 per MHz for the licences in the 2300 MHz frequency band. Thus, the total annual spectrum fee in 2020 for a licence consisting of 10 MHz is expected to be DKK 564,050 and for a 40 MHz licence it is expected to be DKK 2,256,200.
The spectrum fees are also published on The Danish Agency for Data Supply and Infrastructure’s website.”
Questions and answers regarding the 700 MHz, 900 MHz og 2300 MHz auction
Question 2: Guarantee for deposit
In relation to the 1800 MHz template, it is now stated that a signature must be affixed to "[the licensee]":
I assume that this in reality means "[bidder]" – can you confirm or clarify?
The Danish Agency for Data Supply and Infrastructure can confirm that the bidder's signature is requested and in the example of guarantee for deposit the text should have stated "[the bidder]" instead of "[the licensee]".
The Danish Agency for Data Supply and Infrastructure will therefore upload an updated version of the template on the website where "[the licensee]" is changed to "[the bidder]".
Question 3: Bidder seminar and mock auctions
According to the Information Memorandum, a bidder seminar and two mock auctions are planned in September and October, respectively.
Should this be understood as bidders having two opportunities to test the stages 1, 2, 3 and 4 or do you expect it to be divided so that the first mock auction deals with the first stage and the second deals with stages 2, 3 and 4?
In the first mock auction, held in September, qualified bidders will be allowed to test stage 1, stage 2, stage 3 and stage 4.
In the second mock auction, held in October, qualified bidders will be able to test stage 2, stage 3, and stage 4.
Question 4: Bank guarantee
Is it necessary to verify that the signers for the financial institute has the right to sign the bank guarantee and if so how should this be done?
The persons from the financial institute or the insurance company, who sign the bank guarantee for deposit, shall be verified in the same way as persons from the bidder shall verify their signature. That means that the authenticity of the signatures shall be appended, and it shall be appended that the persons who signed, has authority to sign, cf. section 35 in The Danish Agency for Data Supply and Infrastructure’s decision.
In The Danish Agency for Data Supply and Infrastructure’s decision, section 35 referres to section 38 (b), of which it appears that “details and documentation of the names, positions and signatures of the natural persons who are empowered to sign for the bidder or who are otherwise authorised to bind the bidder in any respect regarding the application and the auction, and documentation of such power or authority.”
On page 82 in the Information Memorandum the following regarding price increments appears:
“If none of these lot categories required a price increment when considered individually, then we increase the price of all the lot categories included in the headline bid.”
Could The Danish Agency for Data Supply and Infrastructure please provide an example on when such a situation will occur – preferably with three bidders?
One example is as follows:
Assume that in the second stage of the auction no A lots are offered, and that there are two B lots and four C lots available. There are three bidders participating in the auction. Suppose that at some point after the first round, the price for C lots is set at DKK 100 million, and for D and F lots at DKK 30 million, and that the price for other lots is still at reserve.
Consider the following three packages:
- Package X: three C lots and four D lots
- Package Y: three C lots and six F lots
- Package Z: four D lots and six F lots
Suppose that each of the three bidders bids for all three packages X, Y and Z at round prices, and has not made bids for any other packages. This means that bids for package X are at DKK 420 million, for package Y at DKK 480 million and for package Z at DKK 300 million.
Regardless of their choice of headline bid (for X, Y or Z), all three bidders are identified as omitted bidders. However, when checking the need to increase prices for lot categories individually for each bidder in turn we do not identify any lot category as requiring a price increment
To illustrate this, suppose that all three bidders have selected package X for their headline bid. In this case the assessment of price increments is as follows.
- There are no feasible combinations that include more than one bid, and thus the second auction stage must continue. The maximum value is achieved when accepting a bid for package Z from any of the bidders (as the value of unsold lots at reserve is included in this calculation), so all three bidders are omitted as there are possible value-maximising outcomes where each bidder would not win (if the bid for package Z from another bidder is selected instead);
- When we check for price increments for the lots included in the headline bids (C and D) of each bidder in turn, we do not identify the need to increase the price for any of these lot categories individually:
- When considering lot category C, we use a hypothetical bid for three C lots with a bid amount of DKK 300 million. This bid can be selected as a winning bid alongside an additional bid for package Z from another bidder, yielding the highest possible value. Therefore the bidder would no longer be omitted with this hypothetical bid, and thus we do not identify lot category C as requiring a price increase.
- When considering lot category D, we use a hypothetical bid for four D lots with a bid amount of DKK 120 million. This bid can be selected as a winning bid alongside an additional bid for package Y from another bidder, yielding the highest possible value. Therefore the bidder would no longer be omitted with this hypothetical bid, and thus we do not identify lot category D as requiring a price increase.
Therefore, we need to increase the price for all the lot categories for which the bidder had included lots in its headline bid.
Notice that in the absence of this rule the auction would have reached a point where it does not end, as none of the value-maximising feasible bid combinations includes a bid from each bidder, but where no prices need to increase and thus bidders cannot increase their bids.
Question 6: Usage obligation 700 MHz SDL
If no 700 MHz SDL equipment is available then how can the the usage requirement be met?
According to the Information Memorandum’s Annex C “Draft license” an overall licence will be issued for the frequencies a bidder may acquire in the frequency bands 703.0-733.0 MHz and 758.0-788.0 MHz as well as 738, 0-758.0 MHz (700 MHz frequency band), 880.0-891.9 MHz, 896.9-915.0 MHz, 925-936.9 MHz and 941.9-960.0 MHz (900 MHz the frequency band).
In Annex 1 to the draft licence it is stated that “Antennas and transmitting and receiving equipment capable of using the frequencies specified in the licence shall be installed by the licensee not later than 4 April 2022 at a minimum of 100 mast positions. The equipment at the relevant mast positions shall be connected to the necessary telecommunications infrastructure to enable the licensee, via the relevant mast positions, to offer at least one electronic communications service (at the licensee's own discretion) to end-users by using the frequencies specified in the licence”.
This means that the equipment must be able to use the frequencies that are included in the license but the license holder needs only to use a limited part of the frequencies covered by the license actively, if this makes sense in relation to the roll-out of the network.