State plans 5G tender for February, participants unhappy with process

Telecommunications mast.
Telecommunications mast. Source: Siim Lõvi /ERR

The Ministry of Economic Affairs and Communications hopes to establish the conditions of the 5G frequency bands state tender this year to be able to announce the contest in the start of next year. Telecom company Elisa criticizes the state for its inflexibility in terms of compromises, which the company states could eventually lead to a court battle.

Minister of Entrepreneurship and IT Andres Sutt (Reform) said the economic affairs ministry is planning to establish the conditions of the 5G frequency band tender this year and the procurement will likely be announced in February after the long-debated Electronic Communications Act is implemented. The bill was approved by the Riigikogu in its third and final reading last week.

"We can move forward with preparing the communication networks security regulation and the frequency band tender concurrently. The Electronic Communications Act itself contained authority rights, the security regulation must be approved by the government. Preparations have been completed for the security regulation and the proposals, which we have discussed with entrepreneurs on multiple occasions, will be presented to the government this week. My desire is to discuss this in government next week," minister Sutt said.

The security regulation, also known as the Huawei bill, is aimed at banning the use of Huawei network devices.

After the security regulation is approved, the frequency band tender can also move forward and establish whether there will be three or four licenses opened for the contest. Several communications companies believe they can only offer 4G development, not quality 5G services, on smaller frequency bands.

"I want to establish tender conditions this year and we will have a roundtable with telecom companies on Monday, where they can present their proposals," the IT minister said.

The tender can be announced after the bill is approved. "Companies then have 60 days to register for the tender and express their interest, after which the tender is activated - trading begins and licenses are issued," Sutt added.

Elisa: State's inactivity is harmful to Estonia's investments

Elisa, whose networks use technology made by Chinese company Huawei, should have to switch out their network if the so-called Huawei bill passes. The company is asking the state for compensation, but has not seen any compromises, meaning a claim for damages seems to be the only solution left.

Elisa Eesti CEO Sami Seppänen said passing legislation does not mean much yet, as problems will arise when the company applies for permits to establish networks.

"The question is when we make the first application to develop a network, we either will not get it at all or they will tell us we can only use it for four years. But a network cannot be built for five years, completing the previous network - the 4G network - took eight years," Seppänen said.

The CEO said a Ministry of Economic Affairs and Communications report states that there would not be major consequences to Elisa and that is what the ministry has followed. He added that it is odd that theoretical belief and not fact-based knowledge has become so important in the decision. Seppänen said the specialist responsible for the report also did not have access to Elisa's data and data architecture.

"The court proceedings will be a claim for damages. The ministry knows very well what the consequences are for us, there is no doubt about it. But they do not believe our network providers when they say Elisa's consequences are changing the entire existing network," Seppänen said.

His main criticism toward the state is the ministry's inability to compromise. He said Elisa has offered many compromises with an aim to receive €2.5 million yearly in compensation for a maximum of 10 years. If the case were to end up in court, the damages to the state could be dozens of millions. If the court were to also take into consideration indirect damages, the state would end up paying even more.

Seppänen said the court perspective is estimated to be a positive one for Elisa, since the state has known about the facts for months and it would have been possible to add a compensation claim to the bill at any moment.

A regulation such as this one in is also questionable from the perspective of other major companies participating in the sector, Seppänen said. He said it sends a message to the investors of neighboring countries that there is no point to invest in Estonia.

"If you look at where foreign investments come to Estonia - 50 percent are from [Finland and Sweden]. If you implement such a bill, going beyond the rules of law, it will be noticed that it is not sustainable," he said.

"A message is sent, which says that if you come to Estonia, invest here for eight years, you could suddenly be told that it was a nice investment, but the cables are colored wrong."

It creates a bad precedent in terms of involving foreign investors into long-term strategic investments, Seppänen added, since there are no guarantees or protection for existing investments.

Levikom has been in debt for years awaiting 5G tender

Telecom company Levikom has waited for years for the bill to be approved. The company has been in debt for several years now and has looked at the 5G frequency band tender as a way out.

Levikom said it is important for there to be four licenses put on the tender and not three, since that would play into the hands of the three biggest mobile operators in Estonia - Telia, Elisa and Tele2.

Levikom CEO Peep Põldsamm said implementing the bill is just the first step and things will not get better for the company before the tender conditions have been decided.

The company has not been able to involve investors for three years, since it cannot offer any guarantees. "If you read the media, there have been threats of damage claims - Elisa, Huawei and Tele2 have expressed their positions and say that if the implementation of the regulation leads to unjustified cost reimbursement, they cannot just leave it be. Will this bring forth some kind of delay - I cannot say. We have been in deep trouble for the past three years," Põldsamm said.

He noted that other companies have also shown interest in the tender, such as Bite, which operates in Latvia and Lithuania. "And if they come here, they will not begin developing a 4G network. Then we will have the exact same situation, where they will grab the latest technology," Põldsamm said, adding that the process has cost Levikom some €5 million since 2018.

Levikom Eesti OÜ has also initiated a lengthy lawsuit against the state's previous decision to divide the frequency band into three. The primary concern is whether the distribution of three frequency permits infringes on the freedom of enterprise and whether this is lawful. 

Levikom has filed an application for the company's reorganization in court but is hoping to compete in the competition.

The state wants to auction off three 5G frequencies, a move which, according to Levikom, artificially limits competition in the market. Source: Siim Lõvi /ERR


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Editor: Kristjan Kallaste

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