Government of Pakistan clarification about auctioning the spectrum of 3g/4g and the spectrum of 1900 MHz/2100 MHz


Cellular mobile sector of Pakistan has achieved immense success since deregulation. Over the last four years, cellular mobile teledensity has increased from 40% to the current level of 65% and cellular subscribers have crossed 112 million mark, which were just 65 million four years ago. Today, cellular services cover more than 92% of the land area of Pakistan and the people of Pakistan are enjoying one of the lowest cellular mobile tariffs in the region and numerous modern value added services. Despite slow economic growth, cellular mobile operators have invested more than US$ 6.4 billion during the last four years and annual cellular mobile revenues have increased to Rs. 362 billion in FY 2010-11 compared to Rs. 235 billion in FY 2006-07.

The current government has continued the process of supporting the cellular mobile sector growth by providing conducive environment for cellular mobile businesses and investment in the country to introduce modern technologies in the telecom sector of Pakistan and to provide innovative telecom services to the people of Pakistan. Recently, Government of Pakistan has decided to launch 3G/4G/LTE etc. services in the country. The objective seems to introduce innovative technologies in Pakistan and to increase the proliferation of broadband services in the country through wireless broadband solutions and to provide quality data services. 3G services will facilitate the expansion of various data services including mobile banking, e-education, e-health etc and accessibility of these services in rural areas with positive impact on economy. The Government’s policy for introduction of 3G/4G etc mobile services in the mid- December 2011 desires PTA to start the process through a transparent and competitive auction process for 3G/4G/LTE etc frequency spectrum in 1900 MHz/2100 MHz.  Moreover, Government of Pakistan has also decided to reissue the license of defunct Instaphone against frequency in 800 MHz. Additionally government of Pakistan desires auction of spectrum for WLL services in 1900 MHz and 3500 MHz . Through my resources I have come to know that PTA, the regulator of telecom sector is being run by telecom and financial professionals and it earned respect not only in Pakistan but also abroad in renowned forums like ITU, SAMENA and APT etc. Transparency for the current auction probably would be the first and foremost priority of the regulator to keep up its reputation in Pakistan and abroad which it earned in years. Moreover, PTA would be striving hard to attract reputed investors in Pakistan in the situation where the adverse security environment and slow economic growth is already an impediment to lure reputed investors in Pakistan.

It was surprising to know that some prominent media figures in TV talk shows have unreasonably criticised the process of spectrum auction for 3G/4G/LTE etc services without understanding or lack of knowledge on the subject. It is shocking that hue and cry has been raised in the highest forum of the country where the auction of spectrum has been declared a scam even before the process has taken place.. Base price of US$ 210 million for 3G/4G spectrum has been misconceived as final price of the license and perceived lower than 2G licenses earlier issued by PTA. I was there at the time of the 2G auction and the base price was a mere USD 61 million. Technology neutrality of the licenses has also been criticised. Ridiculously, it has been suggested that separate licenses should be auctioned for 3G and 4G. I believe these assertions are factually incorrect due to lack of knowledge and understanding on the technical subject.

It needs to be clarified that government of Pakistan is auctioning the spectrum of 1900 MHz/2100 MHz which can be utilised for 3G/4G or any expected future advanced technology. In future, if any new better technology comes in the cellular mobile market, the operators can use the most advanced technology in this spectrum, perhaps after approval of PTA. This is most likely the vision behind technology neutrality of licenses and best practice around the world. It should be understood that technology changes quickly these days and we don’t want to stop innovation in Pakistan and keep it open for the benefit of the people of Pakistan. For reference, it is notified that already issued licenses in Pakistan are technology neutral.

While determining base price many factors are considered including expected service revenues, subscribers’ growth, economic growth, per capita income and population of the country. Government of Pakistan has also determined the base price using GDP growth, previous 2G auction price (US$ 291 million for 13.4 MHz), local political situation and experience of the regional countries. The base price is based on per MHz per population and this is almost the same as of India who has auctioned 3G/4G spectrum recently. It is needless to mention that base price is not a final price and serves as a minimum price to start the bidding process. Final bidding price will be determined through a transparent multiple round open outcry method where  the highest bid will be the final price. The auction will be held in front of media, investors, experts and other stakeholders. It would also be pertinent to mention that determining the base price is the best practice around the world for auction of spectrum in different countries like UK, India, Egypt and Taiwan who all set base price before auction. It has also been alleged that PTA is not getting the amount of the license upfront which is factually incorrect. It is important to note that earlier spectrum auction for 2G cellular services had an arrangement of 50% upfront and 50% in instalments in 10 years. It needs to be clarified that in the current auction process for 3G/4G/LTE etc  all the amount will be upfront i.e. 100% of the license price as against the previous bidding where only 50% of license price was upfront amount to be paid. The winning bidder will need to pay this 100% upfront license amount to the government exchequer before the launch of service. PTA has provided all such details in the Information Memorandum (IM) published by PTA and can be accessed on PTA website. So, the elements who are making irresponsible and unscrupulous statements on the upcoming spectrum auction for 3G/4G services should read the IM and related regulatory documents to have information on the current regulatory practices in the country and well defined and transparent procedures of international standards being followed by the telecom regulator for telecom license auctions.

There is another confusion and misunderstanding between the auction of spectrums for 3G/4G/LTE services in 1900/2100 MHz and the reselling/auction of defunct instaphone cellular mobile license in 800 MHz. The original license issued to instaphone was for 15 years at par with the license conditions of the exiting GSM operators. The upcoming auction will be for the remaining 8 years of the defunct instaphone license and accordingly the base price of instaphone (defunct) license is set at U$ 155 million, which is based on the winning bid price of US$ 291 million for GSM/2G spectrum adjusted for the remaining 8 years of the defunct instaphone license.

There are speculations that there will be no transparency in the auction process. I just want to request to our critiques that we are going through a historically sluggish growth period and our economic outlook is not strong. Such unreasonable and unscrupulous statements are not doing good for the country. Already, PTA has a dedicated system in place for the Questions and Answers and any query related to the process of cellular mobile licensing can be placed there. Please do not scare intended investors, rather come forward to attract the best investors of international repute in the cellular mobile industry in Pakistan that can provide us the best of modern technologies and services. Already, renowned international firms are successfully working in the cellular market of Pakistan. Let us take this confidence of investors and international firms further ahead to bring new opportunities in the country.

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