Window opening : Some spectrum available for all telecom operators

Auction designed such that every company would have chance to survive in 3G era.

KARACHI:

With the country moving closer to the spectrum auction for the next-generation mobile internet services, there is a likelihood that all four operators that are in the race for at least one 3G licence may end up securing some spectrum in 2100 mega hertz (MHz) band.

There is a possibility of four 3G licences – that will be auctioned on April 23 – instead of three, the Islamabad-based IT and telecom blog Propakistani said quoting sources with direct knowledge of the subject.

If the Pakistan Tele-communication Authority – the telecom regulatory body responsible for the spectrum auction – chose that route, it would do so to equip four operators with next-generation licences. This would be to develop a more competitive telecom market in Pakistan in the post 3G era, according to Propakistani.

Talking to The Express Tribune, sources, who are familiar with the current developments at PTA, confirmed the possibility whereby four operators might secure a 3G licence as pointed by the blog.

“This is certainly possible that each of the four operators may win some spectrum in 3G band but it will be decided based on the level of competition once the sealed bids are opened,” said an official who requested not to be named. Barring Warid Telecom, each of the remaining cellular mobile operators want at least one 3G licence to survive in the hypercompetitive telecom industry, according to market sources.

The government wants to auction 30MHz of spectrum in the 3G band or 2100MHz band and four operators are in the race, if no new player submits a bid. As per the terms and conditions of the information memorandum (IM) – the main policy document for the spectrum auction – there is a possibility that PTA could create two lots of 5MHz of spectrum in the 3G band. If the telecom regulator chose that route, all four operators would be able to launch 3G services.

The telecom regulator, according to Propakistani, has created four lots for the spectrum auction. Lot A includes one 3G spectrum of 10 MHz from the 2100Mhz band and one 4G spectrum of 10 MHz from the 1800Mhz band. Likewise, Lot B includes one 3G spectrum of 10 MHz from 2100MHz and one 4G spectrum of 10 MHz from 1800MHz – that is the government has tied two 4G licences to two 3G licences, meaning the bidders willing to buy a 4G licence will also have to buy a 3G one.

Lot C and Lot D each include one 3G spectrum of 5MHz from 2100MHz Band – which means the remaining 10MHz can be split into two licences of 5MHz each.

According to sources, no operator can buy more than 15MHz in 3G band, while one operator can bid for one or two lots.

Among all the possibilities, there is a likelihood that two operators end up buying Lot A and Lot B respectively, while the third and fourth operator secure Lot C and Lot D respectively – which means four operators would win a 3G licence.

Asked if choosing that route would kill the competition, the official said, “Nothing is finalised and things will be clearer after PTA receives sealed bids.”

There might be a demand for 15MHz of spectrum by operators who wanted better network quality for their 3G service, he said. With the 15MHz spectrum, according to him, the service provider’s network capacity increases and it may not need additional cell sites. With the 5MHz spectrum, the service providers require more cell sites to maintain network quality – which is costly.

It is, therefore, early to predict any outcomes, the official says. “Maybe two operators bid for 15MHz each that will result in intense competition. Who knows,” he said.

Commenting about the state of competition in the bidding process, an independent expert said the auction was planned such that it would give a chance to each operator to buy a 3G licence if they wanted to survive in the post-3G scenario.

However, the only cost an operator would have to pay in case of buying a 5MHz option would be to install more cell sites (BTS towers) to maintain network quality. But with four operators winning 3G, the competition will result in a price war and that would benefit consumers.

Published in The Express Tribune, April 11^th, 2014.

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