The saga of telecom licence renewal may finally be heading for a resolution. (For some background, read “Telecom licenses: indecision hurts” and “A steep price?” published in this space last month). As the government dragged its feet, two of the three affected telco’s approached the Islamabad High Court last month as their licenses were expiring on May 25. The IHC allowed them to continue operating, instructed both sides to settle the issue among them by July 15, and approach the court again if they could not.
In the wake of the IHC order, the government’s June 25 deadline – the date when the PTA was supposed to start collecting renewal fee from the telco’s – has come and gone. But on that day, earlier this week, a hearing took place at the PTA HQ where operators presented their arguments and government officials listened. It appears that negotiations are now underway to move out of this jam and find a middle ground.
On paper, there is enough reason why both sides might want to stick to their respective stances. The operators’ argument that they be allowed to renew their respective license at $291 million – a figure which Ufone and PakTel (later Zong) were availed on their first renewals – has merit on the grounds of fairness. As operators earn their revenues in rupees, and not in dollars, jacking the fees to $450 million looks excessive. In rupee terms, at $291 million, government can already score four times what it did in 2004!
The government is holding the line that a different, higher renewal price is warranted by changing “international practices, market trends, consumer appetite, (and) advancement in technologies”. Moreover, compared to 2004, telco’s now possess massive networks and consumer base. So, the argument that operators have to have ample capital left to spend on building networks doesn’t hold as much water in 2019 as it did it 2004 when everything was to be built from scratch by Warid and Telenor.
In addition, new policy measures that have been introduced since 2015 (e.g. spectrum trading & sharing) also allow telco’s new avenues of B2B revenues. Therefore, it is realistic to assume that the PTA, already in a strong position of having the regulatory stick, to push for higher fees. Also note that the regulator might not like to have a price lower than $450 million, for as doing so may pull down per PHz spectrum base price for spectrum auctions in the future.
As for the operators, they might be loath to paying significantly more than $291 million unless the deal is sweetened by relaxing some regulatory requirements and/or giving some meaningful concessions to the industry.
In the light of above, should one expect another deadlock? Sources, however, tell BR Research that both sides will be able to find a compromise and they will do it before the July 15 IHC deadline. After all, both the PTA and the telco’s can now show to their respective bosses that they fought till the end, but for business continuity, had to accommodate the other party.
One word of caution, though: the final renewal price should be based on some rational, market-based parameters. Otherwise, an arbitrary pricing figure that is aimed at getting the parties out of the current jam will only set a poor precedent; it will likely not hold up in the future when spectrum sale or license renewal comes into consideration again.
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