Spectrum auction to drive economic growth

The number of telecom users is on an upward trajectory than ever before in the past. As a consequence, companies require more spectrum in order to preserve and enhance user experience.

Experts suggest that the government should, therefore, facilitate the telecom industry. Commenting on the planned release of new spectrum, Finance Minister, also Chairman of the Auction Advisory Committee (AAC), Miftah Ismail said that the government aims to improve mobile broadband services as the sector contributes heavily to the development of the country.

Spectrum auction can help dodge Pakistan’s economic meltdown. The government’s decision to auction the unallocated spectrum in different bands for Next Generation Mobile Services (NGMS) will help drive economic growth.

The new spectrum will be auctioned in the 2,100 megahertz (MHz) band for 10 years, which may fetch around $96 million for every 5 MHz sale. In addition, the auction will enable the government to manage the balance of payments crisis and shore up depleting foreign currency reserves.

In Pakistan, the telecom sector is mainly owned and operated by private companies. However, the sector is facing multiple issues and irregularities on the part of the regulator.

One irregularity is the licences of different operators expiring at different times. This causes undue advantage or disadvantage to some of the operators. Therefore, PTA needs to renew permits to a target date so that the next renewal will happen simultaneously for all operators. The spectrum allocated to Pakistan’s telecom sector remains one of the lowest in the world, with Afghanistan, Nepal and Bangladesh assigning more in the region. The government released the spectrum in 2014, 2016, 2017 and 2021.

Apart from the 2014 auction, where almost all the operators participated, the auctions have largely been unsuccessful due to multiple factors. Unattractive terms and conditions are cited as the primary reason for this failure. This year, the government has planned to auction more unallocated spectrum for 10 years, which is a positive step.

“We have a huge amount of spectrum lying unallocated and unused,” noted ICT expert Parvez Iftikhar.

Spectrum allocated to mobile companies in Pakistan is one of the lowest in the world. More spectrum makes the job of mobile companies easier as the expense on infrastructure goes down, he added. As users of a telecom company increase, companies require more spectrum in order to preserve user experience but PTA has a limit in each bandwidth that it can offer, said JS Global ICT analyst Waqas Ghani Kukaswadia.

The telecom sector’s contribution to the country’s foreign direct investment (FDI) scorecard has plummeted sharply during the last year.

Latest data released by the central bank shows that the net FDI for the telecom sector had dropped abysmally to a net outflow of $29 million in FY22, as opposed to $43 million in net inflows during the previous 12 months.

The readiness of companies to buy more spectrum depends not only on its cost but also the commercial terms and conditions of the sale. For instance, factors include the number of years in which the price has to be paid and what interest payments are payable on installments, explained Parvez Iftikhar. At times, however, a mobile company becomes so desperate for spectrum that it is ready to pay any price. This has happened in Pakistan more than once.

The AAC, after detailed deliberations, has approved the auction of 11.2MHz spectrum for $19.5 million per 1 MHz, which could fetch $218 million (Rs51 billion) to the national exchequer.

The base price is set by PTA for each auction. In the last year’s auction, at $31 million/MHz for the 1,800MHz band, Ufone had acquired 9MHz for a total cost of around $280 million, said Waqas Ghani. This has helped the company improve data speed, he added.

Published in The Express Tribune, August 21^st, 2022.

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