Thanks to the liberalization of the telecommunications market, new telecommunications operators (fixed-line and mobile operators) can now hold a license to offer telecommunications services. The concessions granted by the state to operate the market are associated with state resources. The main resources used in the deployment and operation of a telecommunications network are the radio frequency spectrum, the telephone numbering plan, existing infrastructures, high points and Internet domains. When the State decides to liberalize the telecommunications market, it can always keep the incumbent operator (the leading telecommunications operator), or opt for its total or partial privatization. When the State decides to abandon the monopoly in favor of new entrants, it relies on the revenues that the concessions granted will bring in over time. Concessions are necessary for new entrants, or for existing operators wishing to migrate their networks from one generation to another (2G to 3G, 3G to 4G, and soon 4G to 5G).

Today, the telecommunications sector is considered the world's second largest economy after oil. It's an undeniable fact that the digital economy leads the dance in today's world. This is evidenced by the revenues of the major telephone operators, equipment manufacturers and industry heavyweights (Google, Apple, Facebook, Amazon and Microsoft). This consideration is justified by the volume of electronic communications of all kinds exchanged worldwide by over 7 billion users. Telecommunications services, which rely on telecoms operators, terminal and network equipment suppliers and others, have become an essential part of the information society, guaranteeing a steady stream of revenue for all telecoms companies. Given the contribution of this sector to the economy, all the world's states see it as a guaranteed source of revenue, and are organizing to take advantage of it. The cost of concessions in this field is often the subject of bitter negotiations between the state and the applicant.

How to effectively determine the price of a telecommunications license.

A number of factors need to be taken into account when determining or setting the cost of a concession to a telecommunications operator.

1. - Market size

The telecommunications company or operator targeting a market is interested in the size of the population to be served, or the size of the market. The larger the market, the higher the cost of the concession, and the greater and faster the return on investment. Thus, the cost of the concession is a function of the potential number of customers who will have to use the services. The State also uses the size of the market to determine the amount to be paid by the applicant. A license for the same services or technologies will not cost the same in India, the USA or Haiti. This difference is undoubtedly justified by the number of potential consumers who could guarantee a return on investment. It should be pointed out that in large countries, a concession may be granted exclusively to serve certain regions.

2 - Purchasing power of potential customers

The purchasing power of potential customers is an important factor in assessing the cost of a license. A population with high purchasing power is a guarantee for the operator's investment. When looking at a market, the applicant operator makes projections on average revenues per user to get a more or less accurate idea of the profit he will be able to make. A large market with low purchasing power is of little interest to a telecommunications company, and the state cannot capitalize on the number of potential consumers to set the cost of the license.

3 - Duration of concession contracts

The duration of the concessions granted is another parameter to be taken into account when it comes to cost negotiations. Licenses are granted for a fixed term, and can be renewed at the end of the contract. The longer the term, the higher the cost. Concessions generally last between 10 and 20 years. The company holding the concession has to plan for a return on investment over this period.

4 - Coverage obligation

New entrants will be subject to a network coverage obligation within a given timeframe. If national coverage is envisaged, the operator will have to make major investments. This factor can work to the advantage of the investor, who can capitalize on the expenditure required to offer services throughout the country. The amount will be lower if the coverage obligation concerns part of the country within a longer timeframe.

5 - Number of existing operators

The number of operators in the market is a factor that can raise or lower the cost of a new concession. Telecommunications companies that invest are interested in their share of the pie. The greater the number of operators, the lower the cost of the license. The greater the number of operators on the market, the lower the return on investment. The price of a concession in a large market served by only two or three operators will certainly be high. 

6 - Quantity of resources associated with the concession

The amount of government resources required for network deployment can have a major impact on the price. An operator using 20 MHz for the deployment and operation of its cellular network will certainly not pay the same amount as one requesting 40 MHz. The same applies to the quantity of telephone numbers or existing infrastructure that the operator may wish to use for its operations.

7 - Quantity of services to be provided

The cost of a license may depend on the number of services a telecom operator is authorized to offer. A cellular operator authorized to build a transmission network to serve other cellular operators, and provide other services, will certainly pay more than a simple mobile operator. A license that covers a wide range of telecoms services brings in more revenue for the operator, hence the justification for a higher fee.

All the criteria developed in this text must be taken into account when determining the price of a telecommunications license, to ensure that the process is fair. In some cases, benchmarking is used as a shortcut to facilitate negotiation. In this case, countries with similar populations and economies are taken as examples, and a deduction is made from the analyses to decide how much to charge.

In a sector as vital to development as it is to the economy, cost decisions must be based on the technical and economic criteria used in all markets, and which reflect the reality of the sector.

Investments in technology acquisition and network operations are staggering, and represent a major challenge for operators. To encourage the development of the sector, it would be advisable for the State to capitalize more on the contributions (wealth creation, technological development) that a concession can offer, rather than imposing a prohibitive initial fee, likely to discourage new entrants. The stakes involved in developing the sector in a given country go far beyond the simple cost of the right to operate a telecommunications network.