Finance Division opposes telecom fee in rupees

Industry wants to pay licence renewal fee in rupees; ECC will take up matter for final decision

ISLAMABAD:

The Pakistan Telecommunication Authority (PTA) and the Finance Division have opposed the payment of fee in rupees, instead of dollars, for the renewal of licences of telecom companies.

These companies have approached the court for the renewal of their licences, which expired in 2019. Sources told The Express Tribune that the telecom firms had demanded that the government charge the fee in local currency instead of US dollar.

Last year, the government had set up a cross-stakeholder committee to address critical issues facing the cellular industry in a bid to promote digitalisation.

The committee held consultations with the stakeholders and discussed proposals for biometric verification charges, benchmarking of spectrum fee in rupees and dispute resolution.

The Ministry of Information Technology and Telecommunication has sent a draft summary of proposals to the Economic Coordination Committee (ECC) for its review. The ECC will take up the issue in its upcoming meeting for final decision.

According to sources, the PTA and the Finance Division have opposed the collection of licence renewal fee in rupees, saying the telecom firms should initially pay the fee in dollars.

PTA has set the per megahertz (MHz) price for frequency spectrum in 900 MHz at $39.5 million and in 1,800 MHz at $29.5 million. Spectrum prices add up to a total of $450 million for each company.

Two cellular mobile operators took the matter to court. In their plea, they said they should be given a level playing field with Ufone, which got its licence renewed for $291 million in 2014.

They called for reducing the spectrum price. Later, the government constituted a committee to hold discussion on the renewal of licences of telecom companies.

Earlier, Frequency Allocation Board (FAB) officials had informed Prime Minister Imran Khan in a high-level meeting on April 1, 2019 that regulatory inconsistencies in the renewal of licences should be fixed in order to fetch revenue of $1.3 billion.

When the PM inquired about renewal of licences through auction, FAB officials said the auction could be held only if the companies were intimated three years in advance. The auction could have been possible had the licences been due for renewal in 2022, they said.

In order to expedite the process, the PM ordered the constitution of a ministerial committee to oversee the work of a technical committee and come up with proposals for the renewal of licences.

Pakistan has lagged behind the rest of the world in allocating mobile spectrum.

In this region, only Nepal has allocated a lower spectrum compared to Pakistan. At present, a further 647 MHz of spectrum can be auctioned in Pakistan with the potential to fetch significant revenue for the government.

Any increase in spectrum will lead to lower costs for the telecom industry, price reduction for consumers and widening of telecom services to the unserved and underserved areas.

Industry officials say the spectrum is of no value unless the telecom sector invests in infrastructure and technology to deploy it.

For making investment, they say, the industry must be able to earn a reasonable return, which is commensurate with the risk.

A lack of clarity over the future availability of spectrum can significantly increase the perceived risk for any new investment, they say.

The government had earlier approved a strategy for the auction of spectrum. However, industry analysts propose the execution of a strategy that has been launched recently with definite timelines.

An effective spectrum roadmap will encourage investment in the telecom industry, deliver socio-economic benefits and maximise proceeds for the government.

In some markets, the regulators have adopted the "drip-feeding" strategy for the available spectrum in an attempt to create artificial scarcity and increase government revenue.

However, such a strategy imposes many costs on the people and economy of a country and may eventually result in lower overall revenue for the government.

Most leading countries publish a spectrum roadmap that covers a forward-looking time horizon of three to five years.

Hong Kong publishes a three-year plan whereas Canada and Australia unveil five-year plans.

A roadmap will deliver significant benefits to Pakistan's telecom industry and the consumers they serve, which will subsequently help the government realise its vision of Digital Pakistan.