Licensing Pre-Qualification Criteria

This Practice Note provides more information about pre-qualification criteria.  Pre-qualification criteria are minimum requirements that must be met in order for a person to participate in a competitive licensing process.  As a general rule, pre-qualification criteria establish a baseline of financial capability and technical competence.

The 2007 Nigerian 800 MHz spectrum auction featured a pre-qualification stage.  During the pre-qualification stage, applicants were required to confirm that they met all pre-qualification criteria in order to be designated an Approved Bidder, i.e., eligible to participate in the actual auction.  Box 1 sets out the pre-qualification criteria applied in this auction.  Applicants were also required to pay a deposit into a designated account.  This deposit, called an “Intention-to-Bid Deposit”, was returned to applicants who failed to pre-qualify.  Applicants were informed five days prior to the first round of the auction whether they had met the pre-qualification requirements and had therefore been deemed an Approved Bidder.

PN Prequalification 1

The Saudi Arabian Telecommunications By-law requires the Saudi regulator, the Communications and Information Technology Commission (CITC) to include a pre-qualification stage when licences are issued through auctions or comparative evaluation processes.  The By-law states each applicant in either an auction or a comparative evaluation process must provide:

(a)           clear evidence that the applicant has the financial capability to provide the proposed services an implement the proposed network; and

(b)          clear evidence that the applicant has the technical capability and experience or has access to the technical capability and experience to provide the proposed services and implement the proposed network.

The CITC has the authority to establish the specific form and substance of the evidence that applicants must provide in order to satisfy these pre-qualification criteria.  In 2004, the CITC released a Request For Pre-Qualification (RFPQ) for the licensing process for cellular mobile services.  Pursuant to its authority under the Telecommunications By-law, the CITC established a set of criteria that applicants were required to meet in order to pre-qualify to participate in the competitive licensing process for cellular mobile services.  In the RFPQ, the CITC stated that, in order to pre-qualify, candidates were required to demonstrate that they had:

  • appropriate technical experience and capabilities for deploying and operating a cellular mobile service;
  • appropriate commercial experience and capabilities for running a cellular mobile services company;
  • adequate financial resources; and
  • a commitment to comply with the CITC statutes and all relevant and applicable Saudi laws and regulations, in particular Article 4 of the Act (which requires that fixed and mobile telecommunications services shall only be provided through joint-stock companies that place their stock for public subscription).

The RFPQ also included specific criteria to determine whether a candidate had complied with the above criteria.  Box 2 provides further information about these specific criteria.

Box 2: Specific Pre-Qualification Criteria for the Saudi Cellular Mobile Services Licensing Process, 2004

Technical Expertise/Commercial Expertise

Candidates were required to be a consortium of at least five Saudi Companies or Establishments and a cellular mobile operator (“Operator”) meeting the technical and commercial criteria set out below. The candidate was required to provide a written commitment from the Operator to enter into a management agreement with the cellular mobile service licensee for a period of at least five years from the date of the license issuance.

The Operator was required to satisfy the following criteria:

  • It had to be a telecommunications company that was publicly listed on its national stock exchange with an average market capitalisation of at least SAR3.75 billion (USD1 billion) over the three months prior to the date of issuance of the RFPQ, or a controlled subsidiary of such a company; 
  • It was required to control and operate a cellular mobile network(s) providing services to at least 1.5 million cellular mobile subscribers;
  • It had to have at least two years experience in deploying and operating a Greenfield cellular mobile operation; and 
  • It was required to commit to own at least 15% of the equity of the new licensee if and when Saudi laws permit such investment during the licensing process, and it must undertake to maintain such ownership level, if achieved, for at least the duration of the Management Agreement.

Access to Adequate Financial Resources

Candidates were required to file during the Application Phase, a financial comfort letter from a Saudi bank or from a recognised international bank, in a form satisfactory to the

CITC, indicating availability of financing for the first five years of the candidate's business plan.

Establishment of a Saudi Public Joint Stock Company

Candidates were required to include a written commitment to the CITC in its cover letter to fulfil all the regulatory requirements to establish a Saudi public joint-stock company to be listed on the Saudi Arabian Stock Market upon being notified by the CITC that a cellular mobile service license would be issued to them.

This commitment had to indicate that:

  • a proportion of the company’s stock would be held by the founding shareholders, which according to the Companies Act (Article 100) would be subject to a two year lock-up period;
  • 20% of the company’s stock would be made available for public subscription;
  • the public float would reach at least 40% within three years; and
  • the joint-stock company capital was adequate and relevant to carry out the business plan of the candidate.
Source: Communications Information and Technology Commission (Saudi Arabia), Request for Pre-Qualification of Candidates to Participate in the Licensing Process of Cellular Mobile Services in the Kingdom of Saudi Arabia, 2004

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