Un-authorized allocation of 3G Spectrum to M/s Telenor and Ufone. Audit Report

Telenor and Ufone diverged considerably from their initial intentions indicated in their sealed bids.

The PTA management did not disqualify both the operators due to inactive throughout the bidding in violation of the above.

ISLAMABAD ( ABRAR MUSTAFA )

Pakistan Telecom Authority management did not disqualify UFONE and TELENOR operators due to inactive throughout the bidding in violation of rules of bidding. The record revealed that both the operators did not participate in whole bidding and did not required the eligibility points. So both operators Telenor and Ufone diverged considerably from their initial intentions indicated in their sealed bids. Telenor showed interest in acquiring 2+10 MHz in the 2100 MHz frequency but only bid on a 2+5 MHz lots after the first round of the SMRA. This however, was expected as Telenor had indicated this before the auction. Ufone did not place any additional bids for one of the 2+10 MHz lots in 2100 MHz band, after its initial bid was topped by CMPak.

Above facts revealed in documents received by Telecoalert.com of audit report prepared by audit officer.  He report that  It is un-authorized allocation of 3G Spectrum to M/s Telenor and Ufone. He further reported that according to para 4.2 SMRA auction bidding mechanics, the auction will have an “ activity rule “ to penalize bidders who are inactive by reducing their “ eligibility points”. Para 4.10 – Activity Report, of the information Memorandum for Next Generation Mobile Services Award (NGSMA) further states that bidder will be required to maintain 100% activity in each  round or lose eligibility. A bidder must bid on the number of lots equal to their current eligibility points or their eligibility will be reduced for next round. For example, if a bidder is eligible to bid for 2+15 MHz and only bids for 2+10 MHz in a round, that bidder will only be able to bid for 2+10 MHz in the next round and all remaining rounds of the auction.

The audit report further revealed that during review of documents relating to Next Generation Mobile Services Award ( NGMS ) ( 3G/4G ) it has been observed that Simultaneously Multiple Round Auction   (SMRA )  was took place on 23rd April, 2014 and the operators expressed following intrests in the sealed bids;
PTA-investigation-chart-sep2014 - 3G Auction - Investigation Chart

 

The record revealed that both the operators did not participate in the whole bidding and did not acquire the requisite eligibility points. The PTA management did not disqualify both the operators due to inactive throughout the bidding in violation of the above. At the end of the bidding process PTA management allocated 5+5 MHz on 2100 MHz to the both operators on base price instead of generating competition. This resulted in less generation of revenue on auction of the valued state owned spectrum.

It has further been observe that in Para 3.1.2 ( h ) of post auction report M/s Value Partners recommended PTA to implement an auction design duly offered spectrum in combined auction- 30 MHz in 2100 & 20 MHz in 1800 MHz but PTA deviate from recommendation of the Consultant.

It has further observed that Mr. Yoshio Takahashi, a Moody’s Assistant Vice President and Analyst stated in his report that “ Mobilink was able to secure 10 MHz of 3G spectrum in the 2100 MHz frequency for  $300.9 million, which is well below our earlier expectation of at least $400 million. In addition it was only 2% above the base price set by regulator, the Pakistan Telecom Authority ( PTA )”. The size of spectrum license is also sufficient for the company to defend its existing leading leading position in term of number of subscribers.

It has further stated that M/s Telenor and Ufone each obtained 5+ MHz of 3G spectrum ( $ 147.5 million) at the spectrum auction base price, while Zong obtained 10 + MHz of 3G spectrum ( $306.9 million ) at higher price and 10+ MHz of 4G spectrum ( $210 million ).

The analysis of various reports resulted that if PTA did not allow to Telenor and Ufone for 5+5 MHz, the spectrum would have auctioned at higher price by generating competition among the operators. However, all the circumstances indicated that there was a cartel of the operators due to which the valuable spectrum of the state was auctioned at very lower price.

 

 

 

 

 

 

 

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