Pakistan is a telecom-dense country with a sizable middle class. Its telecom fundamentals and FDI regime compare favourably with its regional peers. The country is served by several reputable international operators. Shouldn’t a telecom spectrum auction be a cakewalk in such a scenario? Especially when government already owns the spectrum and it just has to conduct the auction process properly.
But that has not quite been the case in Pakistan. The previous government made a mess of next-generation spectrum auction in three half-hearted attempts back in CY12. The PML-N government has been making progress, though it could have easily concluded the auction in its first six months.
Pakistan has wasted six years in transitioning from 2G to 3G telecom networks (2008 was the year the 2003-04 telecom policy framework had advised for this migration). But better late than never!
Government wants to make the most money out of this auction. Mobile Network Operators (MNO) would like to pay as little as they can for their licenses. That’s amply clear. And that’s a wrangle one has seen playing out across the high-population telecom markets prior to such big-ticket spectrum auctions.
Though the auction’s Information Memorandum (IM) has not been released yet, news reports quoted Finance Minister last Friday that the auction will be held in April and that the base price for 3G and 4G licenses will be $295 million and $210 million, respectively. The government has worked out an arrangement in which the minimum value (base price) of the spectrum on sale works out to $1.6 billion.
One can only comment on these base prices after analyzing other auction modalities, such as auction design, terms and conditions, rollout obligations and service standards. However, this $295 million base price for a 3G license is 40 percent more than what it was in the January 2012 IM.
One is not sure yet whether the MNOs will give a welcome initial response or just a measured one. The context is important here. The government-operator divide on spectrum pricing has seemingly widened last week. Last week, the Finance Minister spoke his mind in an interview with the Wall Street Journal, where he said:
“Selling just 3G licenses could rise between $1.2 billion to $2 billion; and bundling them with 4G spectrum could generate between $4 billion and $5 billion… We want new entrants to compete… to give better service and to provide more money to the auction.”
One can be sure that MNOs did not like such high estimates. Recall that they had aired their concern last month after the Finance Minister publicly suggested that $2 billion in revenue would be raised. Following the WSJ interview, head honchos at all five MNOs jointly met the Finance Minister and reportedly demanded, unanimously, a low reserve price, easy payment mechanism and favourable license terms.
While the operator interest cannot be gauged with certainty right now, it seems that the government is committed to conclude the auction within this fiscal year to prop up its finances. One hopes that the auction’s design in the IM will incentivise both existing and new players. Also, there has to be adequate emphasis on mobile broadband’s rollout obligations and service quality standards so that consumers can benefit.
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