For 3G auction, help may come from unlikely quarters

Official believes Indian participation may reinvigorate the process.

KARACHI: A telecom official believes that if the Pakistan Telecommunication Authority (PTA) expects to auction third-generation (3G) mobile telecom licences by December this year, the government must increase diplomatic efforts to attract investors from across the border.

“Both countries have made significant progress on the economic front by reducing their lists of items non-tradable items. Given that the telecommunication sector is already open for investment, the government should lobby for attracting Indian telecom operators,” said the source, who spoke on condition of anonymity.

Previously, Chinese, Norwegian, Egyptian, Singaporean, Russian and Qatari companies have invested in the cellular and long distance segments of the Pakistani telecommunication sector. Investments in the telecommunications sector alone account for 32% out of the total of $21.5 billion that Pakistan has received in foreign direct investment (FDI) over the last six years.

In desperate need of funds, the government is relying heavily on proceeds from the oft-delayed auction of cellular spectrum licences. The auction, according to the PTA, will bring in around Rs100 billion through 3G spectrum licences, and another Rs200 billion through infrastructure development.

Before the auction was postponed early this year, telecom service providers Orange Mobile, Vodafone, AT&T and Qtel had confirmed they were not interested in the Pakistani market.

Being the world’s sixth most populous nation, Pakistan is potentially one of the world’s largest telecom markets with a current subscriber base of 120 million. However, PTA’s efforts have so far not been able to attract new players – whose participation could potentially boost the bidding price.

However, given the progress on cross-border trade between the two countries, this may be the right time for the government to invite India for the auction as a gesture of goodwill, the source said.

Telecom, being a services sector, is open to Indian investors, a senior official of the Ministry of Commerce told The Express Tribune; adding that there is no bar on any foreign company, including an Indian one, from participating in the auction. However, he said, non-tariff barriers (NTBs) – such as obtaining a no-objection certificate from the State Bank to repatriate capital – can raise the bar against such participation.

Referring to NTBs, our telecom source said the government should demonstrate an open attitude towards New Dehli by removing all kinds of barriers in this sector. “Participation by India will provide improve the mood of international investors, and the auction may fetch a better price,” he added.

The opening of the telecom sector to India, the source said, may also enable PTA to issue the Mobile Virtual Network Operation (MVNO) licence – a technology for contact-less payment –for both 2G and 3G services for Indian operators. This technology would also help banks on both sides of the border transfer funds through mobile handsets, he said.

Explaining the MVNO, the source said that more than 800 million users worldwide are using the contactless payment technology – which is already in use at large retailers such as Walmart, Starbucks and many others.

PTA can earn additional money from selling off MVNO licences, and later collecting royalty from the proceeds they generate, the source said. He added that the government should make sure that cellular subscribers, while in India, can use their operator’s services without having to pay roaming charges – something he believes will help businessmen as they travel more frequently across the border.

Published in The Express Tribune, September 4^th, 2012.