Pakistan is having another go at selling spectrum for next-generation mobile broadband services. And this time, it might actually will!
Yesterday, the PTA released the Information Memorandum (IM) for what it calls the Next Generation Mobile Services Award (NGMSA). About 58 MHz of spectrum is on sale, in three different frequency bands. At most, 6 licenses will be sold whose collective base price adds up to $1.6 billion. The auctions indicative date is April 7 (see illustration for more details).
Release of the IM essentially kick starts the pre-auction rituals. PTA is giving about 3 weeks for the stakeholders to study the IM, provide the feedback and get their queries addressed. But, for all practical purposes, auction modalities will not alter drastically following the feedback. So lets look at the key features of the IM and what they mean for the operators, the subscribers and the government.
There will be two auction stages. In stage 1, bidders will submit initial, sealed bid offers for at least one 3G license in the 2,100 MHz band; besides a bid for 4G license in the 1,800 MHz band. Only the winner of a 3G license will be able to later bid for a 4G license. The IM states that:
"The 1,800 MHz has been included in the NGMSA to promote and facilitate the early introduction of 4G services in Pakistan. For getting Spectrum in 1,800 MHz band, bidder needs to win 2x10 MHz Spectrum (one 3G license) in 2,100 MHz band."
In stage 1, if the bidders collective demand for spectrum exceeds the spectrum on sale (signifying higher operator interest from both existing and potential new operators), the silent auction in stage 1 will lead to stage 2 where a computerized Simultaneous Multiple-Round Ascending (SMRA)" auction will take hold.
However, in case the bidders spectrum demand is less than spectrum on sale, following the auction modalities, licenses will be awarded to highest bidders and any unsold spectrum will be used for future auctions. (More on auction design very soon).
Government has tried to incentivize winning operators to pay early. The winning bidders will have two options. Either pay all of the final license price within 30 days of the auction conclusion date; or pay half of the final price in first 30 days and the rest in 5 equal annual installments with a mark-up rate of 1-year LIBOR plus 3 percent. All proceeds have to be in US dollars.
The coverage rollout obligations concern all of Pakistan except AJK and Gilgit-Baltistan (see illustration).
Reading the IM, one can sense that the auction is designed to be pro-new entrant. For instance, only a new entrant can bid for the now-defunct Instaphone license. Rollout obligations also allow more time to the new entrant. All existing operators are required in the IM to enter into good faith negotiations with a new entrant on the latters request for nationwide GSM and GPRS roaming and infrastructure sharing.
How this last condition (concerning roaming and infrastructure sharing) pans out is uncertain, as existing operators may not be too forthcoming to a new kid on the block. However, the IM explicitly states that it is PTAs right to intervene in roaming negotiations in case of no agreement among operators. The government knows all too well that a new entrant can ensure high competition in the auction, thereby expanding the final revenue figure for the government.
The IM mandates that mobile number portability service (for data users) should be implemented by the operators on the "first anniversary of their License Effective Date". That augurs well for the customer choice. However, the minimum user data rate of 512 Kbps required from 3G operators leaves a lot to be desired. The minimum data rate on 4G networks is 2 Mbps, though.
PTA, despite its prior intentions, appeared soft on local telecom equipment manufacturing in the IM. It said as much: "The NGMSA Licensee should encourage local manufacturing and R&D by ensuring that an adequate percentage of the equipment (both on the network side and devices) used is locally manufactured."
Well, it all looks set for a showdown in April. In the coming days and weeks, we will find out how operators are gearing up for it.
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KEY FEATURES: NEXT GENERATION MOBILE SERVICES AWARD (NGMSA)
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3G 4G Instaphone*
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Frequency band 2100 MHz 1800 Mhz 850 MHz
No. of licenses on sales 3 2 1
Frequency size 10 MHz 10 MHz 7.38 MHz
Base Price ($ million) 295 210 291
Duration of License 15 years 15 years 15 years
Sealed-bid offer and bid deposit deadline March 25 March 25 March 25
Pre-bid deposit ($ million) 44.25 31.5 43.65
PTA notification to qualified bidders March 28 March 28 March 28
Auction starts April 7 April 7 April 7
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Source: PTAs Information Memorandum for the NGMSA (February 25, 2014) *defunct
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Licensees Minimum Rollout Obligations
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Phases Time since award Coverage requirements
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Existing New
Operator Entrant
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3G (2100 MHz)
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1 6 months 1 year Islamabad and all
4 provincial capitals;
ten more cities (at
least 1 from each province)
2 18 months 2 years 80% of District headquarters
3 4 years 5 years 90% of Tehsil headquarters
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4G (1800 MHz)
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1 1 year 18 months Islamabad and all
4 provincial capitals;
ten more cities (at
least 1 from each province)
2 2.5 years 3.5 years 80% of District headquarters
3 5 years 6 years 90% of Tehsil headquarters
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Source: PTAs Information Memorandum for the NGMSA (February 25, 2014)
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