3G auction may be put off for third time yet

Mobile companies unhappy with certain terms and conditions

KARACHI: The Pakistan Telecom­munication Authority (PTA) has been actively promoting the auction of third generation (3G) spectrum mobile cellular licences; behind the scene developments, however, indicate that the auction may be prematurely aborted for the third consecutive time.

A well-informed telecom source – who was present in a recent meeting between Prime Minister Raja Pervez Ashraf and senior telecom executives – told The Express Tribune that the auction could be delayed for multiple reasons.

“Cellular Mobile Operators (CMOs) have serious reservations regarding the terms of payments for licensing fees,” the source revealed. “They have already communicated their reservations to Dr Basit Riaz [the prime minister’s adviser on IT],” he added.

“The spectrum price has to be reasonable and the terms of payment should be flexible,” the source said, conveying the industry’s main reservations. “If these reservations are not addressed in the revised IM, it may result in further delay.”



He said that despite reasonable cash flows and positive earnings before income tax depreciation and amortisation, the net profits of the top three CMOs are negative – as their operational expenses are pretty high. “The 60-day payment method, therefore, won’t work,” he explained. “CMOs should be given a long-term and flexible payment option,” he added.



Besides the time limit for payment, CMOs are also concerned about the timing of the rollout. If this government conducts the auction and receives licence fees in full, CMOs fear lack of cooperation from the interim government or the next government.

“On the other hand,” the source continued, “if the industry’s reservations regarding long-term payment are addressed, the present government may lose interest, thus causing a further delay to the auction – which may then become the first source of revenue for the next government.”

According to Dr Basit Riaz, the man behind the 3G auction, delays in the auction are costing the cash-strapped economy roughly Rs68 million in opportunity costs on a daily basis. If implemented according to the plan, the auction – as per the government’s estimate – will bring in $1 billion in licence fees and another $1 billion in infrastructure development, besides creating more than 40,000 jobs.

It has been officially communicated to CMOs, the source said, that PTA will advertise a revised Information Memorandum for 3G auction this week and execute it within six weeks once the IM is published, if things proceed as planned.

Published in The Express Tribune, December 4^th, 2012