3G technology: All set for Rs75b auction, launch date unknown

Government plans to raise amount by February 2012 for budget financing.

ISLAMABAD:

The recently approved 3G policy’s main purpose is to hold the licence auction and raise Rs75 billion by February 2012 for budget financing. However, it is still not clear when the service will be launched.

Prime Minister Yousaf Raza Gilani earlier this week approved a recommendation of a special cabinet panel on 3G licence auction. The committee’s out-of-the-box solution will invite existing and new players to participate in the auction although new entrants will be barred to provide 3G services before March 2013.

However, the glitch is that under an agreement with the Etisalat – 26% shareholder of Pakistan Telecommunication Company Limited – the government cannot auction a new spectrum until March 2013.

The finance ministry initially declined to accept the condition and said that the suspension would expire in February 2012 but had to retreat after the Ministry of Information Technology backed Etisalat’s stance. A member of the cabinet committee told The Express Tribune that the body decided to avoid litigation with Etisalat and come up with the novel solution.

However, it was not immediately clear whether Etisalat would accept the solution as it has taken its stance that no new spectrum can be auctioned before March 2013. The government has decided that 3 blocks of 10 MHs each out of available 3G spectrums would be immediately offered for auction.

An official of the information technology ministry said that as part of the solution the government would first auction defunct Instaphone licence to new and old operators as the old licence. If a new operator wins the bid, it will become the country’s sixth operator and would be considered an old service provider, making it eligible to participate in the 3G auction and offer 3G services before March 2013.

Difference of views on upfront payments

A finance ministry official told The Express Tribune that even if a licence is required to operate the spectrum after March 2013, the company will have to make all payments in advance. Although the exact amount cannot be determined, the finance ministry hopes to get at least Rs 75 billion.

“The purpose of declaring March 2013 restriction was to let the bidder know when he will be able to operate. It does not mean that payments will be made in installments,” he added.

The estimated revenue of Rs75 billion is almost 0.35 per cent of the total size of the economy. For the current fiscal year, the government has estimated budget deficit of Rs850 billion or 4 per cent of the Gross Domestic Product. Any shortfall in this revenue will increase the deficit.

An official of the Information Technology Ministry told The Express Tribune that the government has constituted a committee to resolve all issues pertaining to the 3G auction. He, however, said that the successful bidder will pay only a percentage of the total bid while the remaining amount would be received in installments.

The spokesperson of Pakistan Telecommunication Authority said that the exact percentage of upfront payments would be decided by the Cabinet when the final approval of the 3G policy is made. “The worldwide trend is that in such a capital incentive auction, the total amount is not paid upfront,” he added.

Currently there are five telecom sector operators with over 110 million customers. Analysts say that the market is nearing its saturation point and the country may not witness the same enthusiasm which was seen when Warid entered the market in 2004.

Published in The Express Tribune, November 27^th, 2011.