3G AUCTION Telecom companies and Government are not on same page

ISLAMABAD ( BMZ REPORT )As anticipated, the telecommunication companies and the government are not on the same page when it comes to setting the terms of the auction of licences for provision of advanced telecom services. The companies have asked the government to set easy payment terms and a ‘realistic’ reserve price.

The demand, if accepted, may deal a blow to the budgetary and foreign currency reserve targets, set by the Ministry of Finance for the current financial year.

Heads of mobile phone companies met on Thursday with the spectrum auction supervisory committee and spelled out their expectations. Chief executive officers of four companies – Mobilink, Zong, Telenor and Ufone – were present while Warid was represented by its senior officials. Finance Minister Ishaq Dar chaired the meeting.

According to an official of the finance ministry, the telecom companies spoke with one voice, asking the government to avoid demanding upfront payment of licence fee and instead come up with easy payment terms by dividing the amount into equal installments.

The government is expecting to earn $1.2 to $2 billion from the spectrum auction. It has estimated a minimum of $1.2 billion (Rs120 billion) in non-tax revenues for the current fiscal year.

If the government decides to give some relief to the telecom companies, it may miss the budget deficit target that it cannot afford because of commitments to the International Monetary Fund.

The revenue of $1.2 billion from the spectrum auction is part of a plan to increase the country’s foreign currency reserves to $16 billion by June this year from the current low of $7.9 billion.

In the last unsuccessful attempt to sell telecom spectrum, the previous PPP administration had set the condition that the entire amount would be paid within two months but before the award of the licence.

Telecom companies have also demanded that the licence should be for 20 years instead of 15 years, according to officials.

The old Information Memorandum, issued in PPP’s tenure, had offered three technology-neutral mobile cellular licences to existing five operators and any new entrants. It set the licence life at 15 years, which could be renewed for another term.

The heads of telecom companies also sought relief from heavy taxation. They urged the government to determine a realistic reserve price of each licence. Last time, the reserve price had been set at $210 million.

The government has been trying to bring at least one new bidder as it fears that the existing players may collude to its disadvantage.

The auction committee did not commit anything, said Rana Assad Amin, the spokesman for the finance ministry. He said the committee would send their recommendations to the consultants, which will review them and give a report to the committee

Pakistan Telecommunication Authority has hired Value Partners Management Consulting Limited for consultancy services for the auction of next generation services. The consultants have completed an assessment of the market and have held a series of meetings with various stakeholders.

The committee told the mobile operators that a new Information Memorandum would be issue shortly. The memorandum is being prepared by international consultants that will become the base for the licences.

The bidding process will take a minimum of two months from the date of finalising the memorandum. “It seems that the March deadline for the auction may be missed,” said an official of a telecom company.

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