Spectrum auction on April 23: Govt concedes to cellular companies’ demands

Payment to be made in rupee, 18-month freeze on any new auction also agreed.

ISLAMABAD:

The federal government has given major concessions to mobile cellular companies, allowing them to pay the price of third and fourth-generation spectrum licences (3G and 4G) in Pakistani rupee instead of US dollars, besides agreeing to an 18-month freeze on any new auction.

The crucial decisions were taken during a meeting between the Spectrum Auction Advisory Committee and Chief Executive Officers of cellular mobile operators. The meeting was chaired by Finance Minister Ishaq Dar and attended by Minister of Science and Technology Zahid Hamid and Minister of State for Information Technology Anusha Rehman.

The government also extended the auction date by two weeks to April 23, aimed at facilitating the companies to plan their resources and seek necessary approval of their boards.

After the government had unveiled the draft of the Information Memorandum – the policy document describing terms of the upcoming auction –representatives of telecom companies had expressed reservations over the terms, which they described were in favour of the government.

Pakistan plans to issue three licences of 3G, two licences of 4G and one licence of defunct Instaphone, meant only for a new bidder. It has estimated receiving the minimum $1.6 billion.

However, according to the revised terms, the bid price will be in dollars terms but successful bidders have been given the option either to pay in dollars or the equivalent to Pakistani rupee, which will be determined on the basis of the exchange rate on the given day.

The officials said the move will also avert any pressure on exchange rate markets as the companies had refused to bring dollars from abroad and instead decided to raise them from the domestic market.

The acceptance of the demand may hurt the government’s projections for foreign exchange reserves, which has recently increased to $9.7 billion on the back of $1.5 billion contribution by a friendly Muslim country in the Pakistan Development Fund.

This is for the first time that a payment mode has been designed in a way that gives wider choices to bidders but restricts them to pay either upfront or in five years with an interest rate equal to London Inter-Bank Offered Rate plus 3%, said Anusha Rehman while talking to The Express Tribune.

Caving in to another demand, the government agreed with the telecom operators that it would not hold another auction for one-and-a-half years from the date of the upcoming auction. The telecom operators had demanded a five-year freeze but the government agreed to only one-and-a-half year, said Rehman.

She said the condition would not apply to a licence that remains unsold in the upcoming bid. She said the one-and-a-half year time was quite reasonable as, during this period, the successful bidders will be busy in laying infrastructure and rolling out the services.

The companies had also demanded that instead of selling new licences, the government should sell only the spectrum. The move was aimed at avoiding annual licence fees but the government did not agree.

They had unanimously presented their demands and the government accepted most of them. The ASC approved amendments to the Information Memorandum and the revised IM will now be issued soon. The auction is scheduled on April 23, while the sealed bids will be submitted to PTA on April 14.

The finance minister said that the PTA should ensure that best international standards. He emphasised that the consumers should get state-of-the-art next generation mobile services in line with the international best practices. The PTA was also directed by the committee to launch a public awareness campaign.

Dar emphasised that the whole process should be completed with transparency and diligently and expressed his satisfaction over the progress. He expressed the hope that PTA will conduct a competitive auction for deployment of the next generation mobile network.

Published in The Express Tribune, March 14^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.