Telecom licences – govt may resolve row outside court

It can agree on a lower renewal fee; operators should commit to spend more in field

ISLAMABAD: The decision to renew the 15-year-old three expiring mobile spectrum licences - two of them expiring on May 25, 2019 - should have been taken two years ago when the licensees had approached the government with that request.

At that time, a process was started to hire a consultant, but, due to some unknown reasons, was never carried out to the end. To this, another unnecessary controversy of interpretation of “technology neutrality” was added, basically saying that no matter the licences were given with the promise that they would be technology neutral for a 15-year period, the operators still should not be allowed to upgrade the technologies on their own. Weird thinking in today’s age of rapidly changing technologies.

Anyhow, the current federal cabinet discussed and debated the price of licences’ renewal over the last few months. High-level committees were formed. The usual throwers of a spanner in the works also joined in to further delay the process. But the dilemma - which people admitted only privately - was that a logically correct decision would not be deemed to be politically correct.

With only a couple of weeks left, with no assurance whether the licences will be renewed, and at what cost, the nervous licensees - with billions of dollars invested in the mega telecom networks in the country - went to the court. Within days of their going to the court, the decision from the cabinet arrived too.

The story should have ended there. The licensees should have withdrawn their cases from the court, paid the licence renewal fee and played on. But unfortunately, that was not to be. The sore point still stands out - the licence renewal price offered by the cabinet is not acceptable to the licensees.

Options

The option pushed by the licensees was that the renewal price should be the same as it was determined in the auction at the time of granting the original licences back in 2004 - the ie equivalent of $291 million each. At the rate of exchange at the end of 2016, when they applied for renewals, this would come to about Rs31 billion each. It may be noted that back in 2004 the equivalent amount had been only Rs17 billion each.

The option pushed by the government side was that the renewal price should be what was determined by the recent auctions of new (not renewal) spectrum held in 2016 and 2017, i.e equivalent of $450 million which, at today’s rate of exchange, would amount to Rs64 billion each. The gap is more than twice.

There were several permutations and combinations in between. For example, the original dollar value of $291 million at today’s exchange rate could have been taken. That comes to Rs42 billion each.

Another option is to sell a new spectrum in addition to the renewal. It is the time that those hundreds of megahertz of spectrum that are lying unused for years should be made productive for the nation.

Whatever the end is, the dream of getting the proceeds within the current fiscal year seems to have evaporated. Cases in court can take months, if not years.

However, independent observers, like the writer, think more in terms of the bigger picture. What do we need in the country at this point in time - which is also repeatedly declared by no less a person than the prime minister? We need economic development and employment opportunities. Read jobs! This is something the foreign investors in the country, like the mobile licensees, could be made to do for us.

But usually, these foreign investors have their fixed country budgets. Therefore, the more the government takes from them as an upfront fee, the less they are left with to spend out there in the field. A win-win situation would be where the investors/licensees are forced to spend more in the field against paying less as renewal fee. This was also proposed by the relevant task force.

To make the licensees spend more in the field, they can be obligated to increase mobile broadband coverage and improve speed/quality. This would translate into concrete activities, like they will have to lay more optic fibers, install more base stations, expand their franchises and generally upgrade their networks.

All these activities contribute to the economy and create jobs. On top of that will be the ripple effect. As we know, every direct job created means 6 to 8 indirect jobs.

But in order for them to do this - at their cost - they would need some help. This help has to be primarily in the form of facilitation in doing their business. They would need to be helped in overcoming hurdles in the right of way, spectrum pricing and relief in some of the highest telecom taxes in the world that we have.

Solution

In order to come out of the mess that we have landed into, an out-of-court settlement is called for - where the government agrees to charge lower renewal fee and the operators commit to bigger roll-outs and better speeds. The process may not be the most politically correct but it will certainly help the government in achieving its target of job creation, by actually contributing to the ease of doing business.

The writer is former CEO of the Universal Service Fund and is providing ICT consultancy services in several countries of Africa and Asia

Published in The Express Tribune, May 13^th, 2019.

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