Is it time to squeeze the golden goose one more time? Most cellular operators have their licenses up for renewal this year (see the illustration). The telecoms watchdog has been making arrangements for a holistic “cellular mobile license renewal framework” since 2017. But the perennial fiscal worries may divert the recently-formed PM’s “technical committee” to focus more on revenues instead of technical parameters of license renewal.
The fifteen-year-long licenses of Telenor, Warid (now Jazz), and China Mobile (Zong) are expiring in a few months’ time – but thus far there is no clarity from federal the government on the process and modalities of license renewals. What’s the holdup?
One won’t be surprised if the delay is due to the government eyeing to make a killing on these renewals. News reports suggest figures up to $2 billion in terms of license renewals and new spectrum auction. Having renewals and new spectrum sale in one go makes sense because the operators want not only the business continuity (renewal in time) but also to grow by satiating users’ data demand (more spectrums).
But the pricing of both issues needs to be done right by this government. Spectrum pricing has remained a contentious issue – and it’s not just in Pakistan. The governments, especially in low-income countries, view spectrum-sale as an opportunity to earn big, quick bucks out of limited spectrum holdings. But operators feel that paying exorbitant spectrum or license fees limit their investments into network rollouts.
If the government puts forward a base price of $395 million – the higher price-tag paid for by Telenor for 10MHz 4G-spectrum in 2016 – for license renewal and additional spectrum sale, as some observers suggest, it may give the government considerable short-term fiscal relief. At that price, three renewals and two 10MHz block sales should yield the government a little over $2 billion, including taxes.
But achieving that $2 billion figure is questionable. At that base price, telco’s would have no choice but to renew their licenses to continue operating. But that high a base price will discourage them from buying new spectrum. If operators don’t end up buying more spectrum due to capital constraints, it will inevitably hurt network quality, user experience, and with if government revenues in the end.
What’s the win-win that can possibly happen? The government, in consumers’ interests, should specify strict quality-of-service parameters and network coverage before renewing the three licenses. Instead of looking to score big, it can guarantee healthy future investments by going with the precedent renewal fee of $291 million. The government will still get more revenues thanks to PKR depreciation since 2014.
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