Cellular mobile licences: Fate of $1.37 billion revenue hangs in the balance

The fate of estimated revenue of $1.37 billion from renewal of cellular mobile licences hangs in the balance, as mobile companies have rejected the government policy on renewal of licences, while claiming that their concerns were not addressed. Talking to Business Recorder, the representatives of different companies said that the government neither heard nor addressed their concerns and now the final decision will be taken by the court in this regard.
The federal government on Tuesday approved renewal of cellular mobile licences policy for 15 years that would generate an estimated revenue of $1.37 billion. Sources said that telecom operators are of the view that setting the dollar benchmark is not correct as dollar value against the rupee appreciated very much in recent months. "We earn and spend in local currency then how the government can set the dollar benchmark?" they asked. The operators had requested for renewal some 18 months ago, but the government approved the policy just 18 days before the expiry of their licences. "We are going to invest billions of rupees, how it is possible to take decision in such a short time."
Further, the operators were requesting the government to provide a level playing field to all; however, the licence of one of the operators was renewed at different conditions but new conditions were set for other three which cannot be justified. The Islamabad High Court (IHC) will take the matter on May 14, 2019, and whatever decision the court takes, would be acceptable to them, they said.
Telecom sources said that operators had requested for additional spectrum, but the government has approved only renewal policy. In the case of additional spectrum, the government would get additional revenue, while operators would provide better services to the consumers.
The senior officials in the Ministry of Information Technology and Telecommunication also described the renewal policy as conservative because it does not assign additional optimal spectrum, despite demand in the market, which could have generated an additional revenue of $300 million.
The government has decided to renew licences of two mobile operators at $450 million each while the third operator would have to pay $470 million, the sources added.
Prime Minister Imran Khan presided over the cabinet meeting on Tuesday where the matter pertaining to mobile licence renewal was discussed. The cabinet approved the renewal policy and expected a revenue of $1.37 billion through this process.
Cellular licences were issued by PTA to two new cellular mobile operators, i.e., M/s Telenor Pakistan and M/s Warid Telecom on May 26, 2004 for a period of 15 years, under the Mobile Cellular Policy, 2004, on payment of $291 million after auction.
Cellular licence of M/s Paktel Limited, now China Mobile Pakistan (Zong), was also renewed by PTA under the 2004 Policy on October 23, 2004 for a period of 15 years on payment of $ 291 million. These licences are now due for renewal on May 25, 2019 and October 22, 2019 respectively.
In 2014, the government of Pakistan renewed the licence of the state-owned entity, Ufone, at $291 million through interest-free payment instalment in order to maintain a level playing field. Telenor Group had recommended that licence of Telenor Pakistan and other operators be renewed under the same terms and conditions.
M/s Veon, one of the largest foreign investors in Pakistan, has sought predictable and transparent investment climate and licence renewal price of not more than $291 million.
The Sections 8(1), 8(2)(a) and 5(2)(a) of the Pakistan Telecommunication (Re-Organisation) Act, 1996 provide a policy framework for determination of terms and conditions of licences.
The Ministry of Telecommunication had submitted the following proposals to the federal government for consideration: (i) the renewal price for the right to use frequency spectrum included in the licences being renewed shall be in accordance with per MHz price benchmarks from frequency spectrum auctions of 2016 and 2017 i.e. per MHz price for frequency spectrum in 900 MHz and 1800 MHz shall be $ 39.5 million and $29.5 million respectively; (ii) the tenure of the renewed licences shall continue to be 15 years; (iii) payment term shall be 100 per cent upfront or 50 per cent upfront with remaining 50 per cent on five equal instalments on Libor+3 per cent; (iv) licences renewed under this policy directive shall be technology neutral in line with existing GoP policies; (v) provision of spectrum trading/ sharing as per the approved regulatory framework for such sharing/ trading will be incorporated in the renewed licences by PTA;(vi) terms and conditions relating to coverage, enhanced Quality of Service (QoS), etc, under the renewed licences, shall be incorporated by PTA in line with Telecom Policy 2015 and as per applicable regulatory practices; (vii) Frequency Allocation Board will provide options in lieu of cross border interfered spectrum to CMPak (Zong) in 900 MHz band included in its current licences. In case of non-acceptance of proposed options, renewal of CM Pak licence and its associated spectrum (2x 13.6 MHz) shall be dealt in accordance with S. No. 4 (v) of 42nd Board''s meeting decision (i.e. without any compensation in terms of additional frequency assignments.