Brazilian 5G Bidding Call – XII - Final Version of the Bidding Call

Brazilian 5G Bidding Call – XII - Final Version of the Bidding Call

The National Telecommunications Agency (“ANATEL”) published, on September 27, 2021, the Notice of Bidding Competition No. 1/2021/SOR/SPR/CD-ANATEL and the Bidding Call of the bidding that will auction radio frequencies in the 700 MHz, 2.3 GHz, 3.5 GHz and 26 GHz bands, with the issuance of authorizations to exploit the Personal Mobile Service (“SMP”).

This is the largest bidding procedure in ANATELs history, enabling the implementation of 5th generation technology ("5G") in Brazil, which will begin being offered in July 2022, as well as the expansion of telecommunications services in the country with 4th generation technology (“4G”), benefiting not only Brazilian society, but also the national economy. 

The preparation of the Bidding Call’s final wording was carried out after the Federal Accounting Court (“TCU”) decision, contained in Decision (Acórdão in Portuguese) No. 2032/2021, which made several determinations and recommendations to ANATEL, in addition to addressing other topics. Consequently, it was necessary to introduce adjustments in the terms of the bidding call’s draft that had been approved in February 2021 (see articles). After the Directors’ resolutions on said adjustments, the Bidding Call’s final version was approved at a meeting of the Agency’s Board of Directors on September 24.

Receipt of the documents required from the parties interested in participating in the bidding will take place on October 27, 2021, at ANATEL’s premises in Brasília; in the same location, a few days later, on November 04, 2021, the first session of opening, analysis and trial of price proposals will be held. 

The value of the auction was set at BRL 49.7 billion, but due to its non-collection nature, winners of the lots offered should undertake certain investment commitments, which vary according to the spectrum blocks acquired, and which total most of the aforementioned value. The minimum price of the lots, it is worth mentioning, was estimated at more than BRL 10.6 billion.

The Bidding Call, as published, brought the change and/or inclusion of several elements, compared to the previously approved draft. Among these elements, of great relevance, ANATEL accepted TCU’s recommendation (also addressed to the Ministry of Communications) to meet public schools’ connection needs, included as a commitment in the 26 GHz band, which previously had no counterparts. 

To monitor the issue, creation of the Group to Monitor the Costing of School Connectivity Projects (Grupo de Acompanhamento do Custeio a Projetos de Conectividade de Escolas in Portuguese, "GAPE") was determined, to be composed of representatives from ANATEL, the Ministry of Communications, the Ministry of Education, as well as the winners of band lots, for the purpose of defining such commitments. It was also set forth that the winners should form the School Connectivity Management Entity (Entidade Administradora da Conectividade de Escolas in Portuguese, “EACE”) to enable the development of connectivity projects defined by GAPE. Such projects’ term, it should be emphasized, is limited to the validity of authorizations related to the lots, while their respective value is restricted to the amount to be collected with the spectrum acquisition. Additionally, the projects might "contemplate any infrastructure, equipment and resources associated with the achievement of full connectivity of schools, which, for this purpose, need to be installed, built, acquired and distributed", and which shall be transferred to the respective schools’ assets, in accordance with the Bidding Call terms. 

The commitments for implementing the Integrated and Sustainable Amazon Program (Programa Amazônia Integrada e Sustentável in Portuguese, "PAIS") and the Private Communication Network of the Federal Public Administration ("Private Network") were maintained within the scope of the bidding, even though they have been the object of controversy, including within the sphere of TCU. Regarding both, a new Annex IV-B was included in the published Bidding Call, which contains information related to the respective characteristics and specifications thereof. 

Also on the subject, it is worth emphasizing that in an extra edition of the Brazilian Official Gazette of September 17, 2021, Decree No. 10799/2021 was published, which amended Decree 9612/2018 on public telecommunications policies and, thus, allowed the Private Network to be implemented by public or private bodies or entities, as well as Decree No. 10800/2021, which instituted the PAIS and its Management Committee, thus providing more security to the bidding procedure

In other Annexes of the published Bidding Call, the lists of municipalities, locations and highways to be served by winners of the applicable lots were also included. In turn, the Manual of Instructions on Submission of Guarantees, which corresponds to Annex XI of the Bidding Call, was published on ANATELs website at a later time.

Therefore, as it has been set forth in the Bidding Call, in the 700 MHz band, national and regional blocks will be auctioned. Specifically for this spectrum, there should be the service, with 4G or a higher standard, to locations and highways that currently do not have such coverage. The authorization for the use of radio frequencies ("RFs") will be granted for a period of 20 years, extendable against payment, and the participation of a bidder, its subsidiaries, parent companies or affiliates which already hold, in the same geographic area, authorization for the use of RFs in a primary character in the band from 696 MHz to 806 MHz, or which is in the process of transferring corporate control pursuant to an agreement, contract or other instrument which object is the sale and/or acquisition of shares or the establishment of preemptive rights for the sale and/or acquisition of shares with a group that already holds authorization for the use of RF in a primary character in the aforementioned band from 696 MHz to 806 MHz, is not allowed.

Blocks of 50 MHz and 40 MHz will be offered in the 2.3 GHz band, with an authorization to exploit the services for a period of 20 years, also extendable against payment. The commitment to be undertaken corresponds to the provision of coverage of 95% of the urban area of municipalities that currently are not served with 4G technology.

In turn, in the 3.5 GHz band, national and regional blocks of 80 MHz will be auctioned in the 1st round. In case there is no winner for any of these blocks, blocks of 20 MHz will be offered in the 2nd round. The respective authorization to be granted will be valid for a period of 20 years, also extendable against payment. As commitments, it has been determined that the winners should:

  • Install transport networks (optical fiber backhaul) in certain municipalities;
  • Install Radio Base Stations (“ERBs”) to offer SMP with a standard equal to or greater than the 5G NR release 16 of the 3GPP in minimum quantities pre-established by the Bidding Call;
  • Refund the costs for the migration of the reception of free and open television signal by means of satellite dishes in the satellite C band to the Ku band (which includes the distribution, installation and configuration of equipment allowing the respective signal’s reception to certain eligible beneficiaries), as well as the costs arising from the vacancy of the band from 3625 MHz to 3700 MHz (currently allocated to the Fixed-Satellite Service);
  • Implement PAIS and the Private Network.

With regard to the 26 GHz band, national and regional blocks of 200 MHz will be auctioned in the 1st round, with an authorization period of 20 years. In case there is no acquisition of lots in this initial round, in a 2nd round blocks with also 200 MHz will be offered, but with a 10-year grant period. In both cases, the aforementioned terms might be extended against payment. In addition, as previously mentioned, the commitment to be undertaken by winners is related to projects aimed to provide connectivity to basic education public schools, with quality and speed enabling the pedagogical use of information and communication technologies ("ICTs") in educational activities, in accordance with the Connected Education Innovation Policy (Política de Inovação Educação Conectada in Portuguese, Law No. 14180/2021 and Decree No. 9204/2017). 

The current 200 MHz configuration of the lots offered in the 26 GHz band, as well as the possibility of a 20- or 10-year grant period, depending on the profile of lots acquired, to wit, was one of the changes included in the published version of the Bidding Call, with players in the telecommunications sector expressing being in favor and contrary thereto

Proceeding with the stages of the bidding procedure, still on September 27, 2021, same date of the Bidding Call’s publication, ANATEL (i) by means of Personnel Ordinance No. 990, constituted the Special Bidding Committee (Comissão Especial de Licitação in Portuguese, “CEL”), composed of members of the Agency who will be in charge of conducting the bidding procedure; and (ii) by means of Ordinance No. 2068/2021, created the Technical Advisory Committee (Comissão de Assessoramento Técnico in Portuguese, “CAT”), which will assist CEL in the work related to the bidding procedure.

We emphasize, however, that this informative material contains only a brief summary of some important points of the Bidding Call published by the Agency, which also includes several relevant points. Therefore, this article should not be understood as legal advice regarding specific aspects within the scope of the bidding procedure.

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