ISLAMABAD: The impact of unsold spectrum because of excessive reserve prices in the upcoming auction will be substantial with a two year delay to the availability of new spectrum is projected to result in a loss of $1.8 billion (Rs500 billion) in GDP over the 2025-30 compared to a baseline scenario in which all bands are sold and this increases to $4.3 billion (Rs1,168 billion) in the case of a five-year delay, says Global System for Mobile Communications Association (GSMA).
Past auctions in Pakistan have often resulted in unsold spectrum, on account of high reserve prices, which contributed to slower 4G rollout and adoption, besides failing to realise additional benefits of some $300 million (Rs80 billion), said GSMA in its latest report “Building Digital Pakistan through effective spectrum policy.”
Pakistan faces several challenges that threaten the sustainability and growth of its mobile infrastructure, as the country has been affected by high inflation rates, currency depreciation, and rising energy costs, all of which negatively impacted consumer spending and increased operating costs for the telecom industry.
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Currently, Pakistan has among the lowest amount of assigned spectrum for mobile in the Asia Pacific region at around 270 MHz, compared to the APAC average of more than 700 MHz in low and mid-bands, it added.
Spectrum costs for mobile operators in Pakistan have risen significantly over the past decade. Total spectrum cost as a proportion of recurring revenue has risen from 11 percent in 2014 to 20 percent in 2022.
Though there are several reasons for this increase, one main factor is the threat of rising spectrum costs depreciation of the Pakistani rupee against the US dollar since 2017.
Unlike in most countries globally where spectrum fees are paid in local currency, spectrum charges are in US dollars, putting operators at risk of fluctuations in financial markets.
The rising cost of spectrum is unsustainable and poses a major threat to the future development of mobile services.
Operator revenue per MHz of spectrum is falling while the bandwidth needed to meet user demand is rising. With the total supply of mobile spectrum set to increase potentially by threefold, the trend of rising spectrum costs is simply not sustainable. For operators to be able to fund sufficient investment in future spectrum and networks change is needed.
The GSMA stated that auctions can be undermined by high reserve prices, which increases the risks of unsold spectrum or results in less funds available for investment.
Past auctions in Pakistan have often resulted in unsold spectrum, for example in 2014 (850 MHz, 1800 MHz) and in 2021 (1800 MHz, 2.1 GHz), leading to reduced spectrum supply for mobile operators. This has contributed to slower 4G rollout and adoption.
Analysis by GSMA Intelligence shows that if spectrum had been fully assigned in previous auctions, additional benefits of some $300 million (Rs80 billion) would have been realised.
In a positive development, the PTA will be making available close to 600 MHz of spectrum in key harmonised bands, including 700 MHz, 1800 MHz, 2.1 GHz, 2.3 GHz, 2.6 GHz and 3.5 GHz, in an upcoming auction scheduled in early 2025. This spectrum will be essential to address the spectrum shortfall, support mobile industry development and accelerate the growth of Pakistan’s digital economy, it added.
Pakistan’s upcoming spectrum auction should focus on enhancing the country’s digital infrastructure rather than maximising government revenue. The 600 MHz set to be made available in the upcoming auction, including over 500 MHz in the core mid-bands such as 2.3 GHz, 2.6 GHz and 3.5 GHz, which will be essential to addressing the country’s current shortfall.
Excessive spectrum pricing has serious consequences for industry and consumers. Studies by GSMA Intelligence and others have found a causal link between high spectrum prices and slower mobile data speeds, worse coverage and slower rollout.
The GSMA has presented several recommendations including, set reserve prices for all bands conservatively, and lower than in previous auctions, to allow the market to determine a fair price and to reduce the risk of leaving spectrum unassigned, denominate all spectrum fees in local PKR, instead of USD, to mitigate the impact of currency fluctuations, provide payment flexibility with options of instalments over the duration of the licence.
Any upfront fees will need to be set as affordably as possible, carefully consider any licence obligations, in particular, the costs of meeting any obligations should be deducted from spectrum fees and commit to a spectrum roadmap to reduce uncertainty about future spectrum availability and aid network planning.
Copyright Business Recorder, 2025