Govt sets base price for final spectrum at an ambitious $295 million

Expects stiff competition, spectrum to be sold before July this year

KARACHI: Expecting stiff competition for the last 3G/4G mobile internet licence, the federal cabinet has set the starting bid price at $295 million, as it looks to shore up dwindling revenues through auctioning the spectrum.

The cabinet tasked the telecom regulatory authority to sell the spectrum before the current fiscal year ends on June 30, 2017 so that it may help the government achieve the ambitious revenue target of Rs3.60 trillion for the year.

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The Ministry of Information Technology and Telecommunication said in its policy directives to the Pakistan Telecommunications Authority (PTA) that "the spectrum assignment will be technology neutral and usable for all Next Generation Mobile Services (including 3G/4G and advanced generations)."

The base price was determined keeping in view growing demand for internet data from end-users and "more frequency spectrum is expected to be required by the operators," the policy directives added.

The base price is 29%, or $85 million, higher than the one ($210 million) at which China Mobile (Zong) acquired 4G spectrum of the similar technical specifications (10MHz block in 1,800MHz band) in 2014.

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An Information Communication Technology's expert, Parvez Iftikhar, said this was an exorbitant price. The cost would increase further due to collection of 10% advance tax on the final auction price, he said.

The government is selling the leftover spectrum of 2014 now. One of the reasons for which the government failed to sell the spectrum at that time was the ‘higher price,’ he said.

Contrary to the government's high expectation of attracting stiff competition for the last licence, Iftikhar said he foresaw ‘zero competition’ because of the higher base price.

"If the government intended to invite competition, it should have put the base price at a nominal level ... the set base price would attract only those mobile phone operators which are in dire need of the spectrum to provide quality services to their clients," he said.

"The auction would help a desperate Ufone, that has only 5MHz block in a 3G band," he opined.

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The other companies, which may participate in the auction, may include those whose licences are expiring in the near future. "Warid Telecom and Telenor licences would expire sometime around 2019," he said, adding Telenor has already acquired a spectrum last year, while Warid has merged with Mobilink," he said.

He said the government should provide spectrums free of cost like the Japanese government does, as they generate economic activities, serve education, health and agriculture sectors, while creating job opportunities.

He said the higher price was meant for the government to achieve its revenue collection target.

The Federal Board of Revenue collected Rs1.45 trillion in the first half of the current fiscal year, short by Rs142 billion from the set target.

According to PTA’s latest data, four mobile phone companies in the country serve 137.09 million customers. Almost 28%, or 38.26 million of them, are users of 3G/4G mobile internet as on January 31, 2017.

It would be the third auction of spectrum since 2014. The government has earned around $1.5 billion in the last two auctions.