Review of the Individual Licensing Process

1. Review of the Individual Licensing Process Presenter: Mrs. Josette Maxwell Dalsou Financial Analyst � ECTEL Licensing Training Workshop 29 � 30, 2009, Saint Lucia

2. Outline Objectives of licensing Why a harmonized approach Individual licensing process Steps in process Qualification Criteria Selection Criteria Exercises

3. Objectives of Licensing Provides certainty and confidence to investors and lenders Provides a clear understanding to consumers, competitors and the government of the requirements of the operator Consumer Protection Generates government revenues

4. Objective of Licensing (2) To regulate the provision of the an essential public service Expansion of networks and services and universal service obligations Ensures the viability and benefits of competitive entry The allocation of scarce resources

5. Why a Harmonized Approach (1) The approach to licensing is harmonised (identical legal and regulatory treatment) in all the five ECTEL Member States: It increases the incentives and scope for investors to design business plans to incorporate a single ECTEL market as against separate and distinct markets Regulator achieves greater efficiencies when making licensing decisions

6. Why a Harmonized Approach (2) The process is simpler to administer and therefore approval can be dealt with in a timely manner across the states Reduces uncertainty and risks to the investor Reduces unfair advantage between member states as all states are therefore at a level playing field in terms of legal and regulatory treatment Reduces barriers to entry in that legal and information costs to the investor are reduced

7. Individual Licensing Process (1) The choice of licensing process is tied to : Structure and Competitiveness � Most markets are becoming competitive The number and type of licensed operators � The number of operators can be restricted procedurally through public consultation as provided for under regulation 14 of Telecommunications (Licensing and Authorisation) Regulations (TLAR). The revenue objectives of the policy makers - Has it been designed appropriately to meet the financing requirements of the sector? The efficiency of supply of the services to the public

8. The Individual Licensing Process (2) The applicant is required to submit in writing a completed application form with supporting documents along with the prescribed application fee (non refundable) to the NTRC (regulation 6 of TLAR) The Commission shall within 7 days inform the applicant of any further information required to process the application (regulation 5(2) of TLAR) The application with supporting information should be forwarded promptly to ECTEL (regulation 7(1) of TLAR) NB. Current regulations does not include specific timelines for these activities except that the application should be promptly forwarded to ECTEL. New Regulations provide a 60 day period from receipt of application to recommendation to Minister.

9. The Individual Licensing Process (3) Application is received by ECTEL and relevant sections are submitted to Legal, Finance and Technical Each dept verifies that relevant supporting document was received Where documentation is lacking, ECTEL notifies NTRC that applicant should be asked to submit required information

10. The Individual Licensing Process (4) When required information is received, application is evaluated and the recommendation made is sent to the NTRC for onward submission to the Minister. NTRC to forward ECTEL�s recommendation to the Minister within 30 days of receipt Under New TLAR regulation (7(3)) � ECTEL has 60 days to make a recommendation and NTRC must forward the recommendation to Minister in 5 days

11. The Individual Licensing Process (5) The process involves both qualification and selection criteria Qualification Criteria � The minimum requirements for the right to participate in the selection process Selection Criteria � Evaluation based on assessment of quantitative and qualitative criteria

12. Qualification Criteria Applicants must submit documents to verify whether they meet legal, financial and technical requirements to be considered for evaluation.

13. Qualification Criteria (2) Legal Requirements Application form Registered Number Certified copies of Certificate and Memorandum of Incorporation to show that the applicant is a valid legal entity Certified copy of Certificate of Good Standing

14. Qualification Criteria (3) Financial Requirements Source of Funding Comfort letter, letter of intent to verify source of funds Business plan with assumptions and market forecasts Pro-forma financial statements for three or five years to include balance sheets, cash flow statements and income statements Resume of key managerial staff

15. Qualification Criteria (4) Financial Requirements Going concern the applicant must submit audited financial statements which includes certified income statements and balance sheets for the last three years or five years depending on the country New Entity a new entity there should be a certified statement of financial affairs of each director

16. Qualification Criteria (5) Financial Requirements Diagrammatic representation of group structure also percentage of shares held Names of Shareholders with at least 10% of issued shares

17. Qualification Criteria (6) Technical Requirements Activities: Details of current and planned activities in the OECS, wider Caribbean and internationally Networks: Summary of infrastructure the applicant has in place or plans to install including radio-based infrastructure Services: Products or services being provided or services being planned by the applicant

18. Qualification Criteria (7) Technical Requirements Licensing Obligations: How the applicant plans to comply with licence obligations Frequency authorizations held or required Resumes of key engineering staff

19. Preliminary Review Upon an initial examination of the documents submitted, ECTEL will indicate to the NTRC whether there is a need for additional information before the application can be subjected to more rigorous evaluation

20. Selection Criteria

21. Evaluation Process for Individual Licences - overview Legal To ensure that the applicant is a valid legal entity registered to do business in the state Financial To ensure that the applicant has sufficient funds to launch the proposed operation To ensure that source of funds is verifiable and legal Technical To ensure that firm has technical capability both equipment and personnel to support the proposed operations

22. Evaluation Criteria Approval is granted to the licensee if he achieves the minimum overall score of 65 with 30 points from the financial evaluation Total points that can be awarded to applicant for each area Legal - 5 points Financial � 60 points Technical Criteria � 35 points

23. Evaluation Process - Legal Rationale To ensure that the applicant is a valid legal entity registered to do business in the state Required documentation Proof of incorporation or registration in the state Certificate of good standing Process Legal documents are reviewed for authenticity. Applications that do not satisfy the legal criteria are not to be evaluated further.

24. Evaluation Process - Finance Rationale To ensure sufficient, verifiable, legal funds and a business plan consistent with licence being sought Required documentation Comfort letter from financial backer Financial statements of financial backer (if not a lending institution) Business plan Pro forma financial statement for proposed operations (3 � 5) years Audited financials if applicant is a going concern (3-5 years) Diagrammatic representation of group structure (where applicable) Resume of key management personnel

25. Evaluation Process � Finance (2) Evaluation Process Review of Source of funds Document submitted are reviewed to determine amount and nature of financing (i.e debt, equity, or grant funds) guarantor of funds nature, history, reliability and goodwill of institution providing funds

26. Evaluation Process � Finance (3) Review of Availability of funds Comfort letter or letter of intent are examined to ensure that it is in relation to the applicant and is from a reputable institution supporting documents including audited financial or bank statements are reviewed to verify ability of investors to provide required funds

27. Evaluation Process � Finance (4) Review of business plan Business Plan is examined for Services to be provided Projections for revenues and costs Projections for market penetration and activity

28. Evaluation Process � Finance (5) Review of pro forma statements Ratio analysis Liquidity ratios (current and quick ratios) Solvency ratios (debt/equity, interest coverage) Profitability ratios (ROCE, profit margins) Cap-ex projections Consistency with source of funds declaration

29. Evaluation Process � Finance (6) Review of Managerial Resume Resume of key managers are reviewed to ensure that they have requisite skills in the areas of finance, marketing and business management. Assignment of Score for Finance A score is assigned to each evaluated element in accordance with the revised criteria for evaluation of individual licences.

30. Evaluation Process � Finance (7) Each component is scored against a maximum score

31. Evaluation Process - Technical Rationale To ensure that firm has technical capability both equipment and personnel to support the proposed operations Required documentation Details of network infrastructure Details of products and services to be offered Details on relationship with suppliers of network or service components Detailed plan to comply with license obligations

32. Evaluation Process - Technical Evaluation Process Documents submitted are reviewed for Engineering experience Availability and Qualifications of Technical staff Appropriateness of Technology proposed Appropriateness of System design and Strategy proposed Assignment of Score for Technical A score is assigned to each evaluated element in accordance with the revised criteria for evaluation of individual licences.

33. Evaluation Report An evaluation report is prepared including the scores from the legal, finance and technical evaluations.

34. Evaluation Process � Rating System Rating system Legal - 5 points Finance � 60 points Technical � 35 points

35. Evaluation Process - Score Applications are scored based on approved criteria Successful applicant must obtain Minimum overall score of 65% Minimum of 30 points in financial evaluation

36. Recommendation from ECTEL Upon completion of the evaluation, ECTEL notifies the NTRC of its recommendation The Commission must forward the application to the Minister with ECTEL�s recommendation within 30 days of the receipt ECTEL �s recommendation

37. Issuance of Licence Upon receipt of the recommendation of the individual licence from ECTEL, the Minister shall within 21 days notify the applicant in writing of his or her decision The applicant proceeds to pay the licence fee to the NTRC The NTRC notifies the Minister of the payment and applicant presents proof of payment upon collection of the licence

38. Issuance of Licence The Ministry is required to send a copy of the licence to the NTRC for registration The NTRC forwards a copy of the licence to ECTEL Where an application is refused, the Minister shall notify the applicant in writing the reasons for refusal.

39. Thank You

40. Evaluation Process for Individual Licences � Issues for Discussion Issues that arise: Application submitted to ECTEL is incomplete Application is delayed at NTRC before it is forwarded to ECTEL There is a delay in response from ECTEL in relation to the application There is a delay in applicant responding to request for required supporting documents Supporting documentation submitted in response to request is still insufficient Repeated requests sent to applicant Application has been in the system for more than say one year