The government could face Rs 65 billion shortfall in the budgeted non-tax revenue for the current fiscal year 2015-16 as the auction for 3G/4G spectrum is unlikely to materialise, it was learnt. Fearing poor response from the market, the government has little hope to complete the sale of remaining 3G/4G in the current financial year and to mobilise budgeted non-tax revenue, official sources revealed to Business Recorder.
Pakistan Telecommunication Authority (PTA) hired InterConnect Communication; the UK-based consultant for 3G/4G spectrum auction and was assigned to conduct market assessment. The consultant has finalised and submitted the report to the evaluation committee of PTA which will further submit it to the Auction Advisory Committee. Sources revealed that initial report (first phase) filed by the InterConnect Communication on market assessment was presented before the Advisory Committee in the first meeting held in January. The committee was informed that consultant was working on the second phase and complete report would be shared with the committee by end January. However, the report is yet to be shared with the Advisory Committee.
According to sources, the first phase was comprised on market situations/preparedness while second phase is comprised on technical aspects including technical evaluation and spectrum availability. The Advisory Committee after examining and evaluating the final report will devise an auction strategy and methodology and will issue policy directive for the spectrum auction.
The first phase of the market study has reportedly painted a bleak picture of market readiness by saying that five telecom players are already operating in the market with low margins and huge competition. Moreover, operators' intent for investing in the spectrum is lacking and any auction in the near future could not bring any significant participation from local operators. Telecom operators, during their meetings with the consultants, had expressed concerns over high taxation, low investment return; high costs including energy crisis and the law and order situation in the country.
They further informed the consultant about their commitment of major investment in the 3G/4G auction held in April 2014. During the last auction process, the government assured the operators that major challenges faced by the industry would be addressed on priority basis. However, the promises made during the auction process remain unfulfilled till date.
It has been allegedly pointed out that heavy taxations have badly affected the prospects of upcoming 3G/4G auction. Access to broadband services in the country was three percent before the launch of 3G/4G services, which is now around 15 percent. According to an international study, a country could reap internet fruits of its contribution in its economy once the access to services cross the mark of 20 percent.
However after the federal government, provincial governments also imposed heavy taxes on telecom sector especially on broadband services, which is at the initial phase of its survival. The government approved a new telecommunication policy recently with the objective to improve the sector's efficiency and service delivery but refused to give the status of industry, which it desperately needed to get relief from heavy taxes, officials added.
The situation further worsened for the government after the Mobilink-Warid decision of a merger. If the merger gets approved, Mobilink will not need to participate in the upcoming 4G license while Zong is already carrying both 3G/4G licenses. Sources said that the Finance Ministry is allegedly stressing the Ministry of Information Technology and PTA to expedite efforts for early auction of the remaining spectrum.
However, background interviews with different telecom operators revealed that market is not ready for the auction due to heavy investment after the early 3G/4G auction, SIMs verification through biometric system and heavy taxation on mobile internet and data services.
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