Could more have been achieved? We uncover the behind-the-scenes of the Polish auction.
dr hab. Paweł Kuśmierczyk
expert of the Wroclaw University of Economics and Business
An auction is a competitive mechanism in which certain goods are sold to those who offer the highest prices. It is launched when it is impossible to objectively value a good that, due to its specifics, has never been traded before. One typical example of such assets is frequency licenses.
October 18, 2023. Poland held a 5G auction in the 3400-3800 MHz band, which raised PLN 1.92 billion. While it’s good that after a 3-year delay, the action was finally carried out and 5G licenses were distributed, it’s worth reflecting on the final result achieved .
The auction was short-lived, only 2 days, and the amount obtained was only 6.7% higher than the asking prices. That’s not much, especially when looking at Germany’s 2019 5G auction, which lasted three months and brought in as much as €6.5 billion, or Poland’s multi-month 4G auction in 2015, which brought in 9.2 billion.
So can the sale of 5G licenses in Poland be considered a success?
The case has a broader context. Whenever we talk about selling public assets, whether in the form of privatization or concessions, the same problem arises. Is the amount obtained really the highest market valuation? Could more have been achieved?
The answer depends on three key factors: demand, supply and the auction mechanism itself. This is an area that is subject to theoretical and experimental research, as each auction has its own specific conditions. The final result depends on how these three components work together.
In the case of the 5G auction in Poland, the allocative effect – that is, the allocation of concessions – was overwhelmingly positive. What about the amount received? Was the market competitive enough? With 4 concessions for 4 existing companies, there is concern that the auction may not have been conducive to fierce competition or the entry of potential new players.
Although the 5G auction is a thing of the past, it is worth learning from this story. Could something have been changed to achieve a better result? Flexibility of supply, a different auction mechanism or simply more sophisticated research on the market could be key. Their cost would be small considering that there are billions of zlotys to be raised. Preparing for future transactions of this type requires an understanding that the auction should be both an effective tool for raising budget funds and a catalyst for the long-term development of the telecommunications sector. The auction planning process should therefore include both spheres to achieve optimal results.
