Spectrum auction: To industry’s displeasure, govt ups revenue target

Expects to earn $2b from auction against earlier estimate of $1.2b.

ISLAMABAD:

As he prepares to leave the country after a brief visit, Jon Fredrik Baksaas, President and CEO of Telenor Group, may not be a happy man.

The government, as opposed to the industry’s reservations about the spectrum price, has announced a fresh, and perhaps a more ambitious, revenue target for the spectrum auction.

“Finance Minister Ishaq Dar said Pakistan expects to earn an estimated $2 billion through the auction of three spectrum licences,” said a press release issued by the finance ministry after Dar’s meeting with Baksaas on Friday.



The ministry’s statement, however, clarified it was their expectation only as they had already set a conservative figure of $1.2 billion for budgetary purposes.

The revised target may not be in line with the expectations of Telenor Group’s top man who made a special visit to Pakistan just ahead of the spectrum auction for high-speed mobile internet services due to be completed in the first quarter of 2014.

In a trip that lasted less than a day, Baksaas met top government officials including the finance minister, Pakistan Telecommunication Authority Chairman Ismail Shah and President Mamnoon Hussain to convey the company’s concerns and reservations about the spectrum auction.

The telecom market in Pakistan has developed tremendously and the industry is embarking on a new phase, therefore, Telenor needs to understand the government’s policy on the auction, Baksaas told a group of journalists here while explaining the purpose of his visit.

Striking the right balance

Summarising what was discussed in the meeting with Dar, the chief of Norwegian telecom giant and parent company of Telenor Pakistan said the government should strike proper balance between long-term and short-term gains the spectrum auction can bring to the country.

The country is entering the next layer of telecoms, which is 3G, the CEO said. “Telenor, as a long-term player, wants to engage and understand the [auction] process before it commits to it.”

In the long run, the government should be looking for broader penetration of mobile broadband through 3G services, Baksaas said. “We have tried to explain this to the government and believe they will understand our viewpoint when the final package comes out,” he added.

Responding to a question about what he thought was the right balance between financial proceeds of the spectrum auction and nationwide rollout of the technology, Baksaas referred to the 2004 spectrum auction that resulted in their entry into the Pakistani market.

The 2G spectrum auction of 2004 had the right balance and eventually resulted in wider penetration, he said. “We want to see a similar balance again as the government moves to roll out 3G technology for high-speed data services.”

Baksaas avoided being specific on what he felt about the government’s revised revenue expectation, which is 66% higher than that set in the 2013-14 federal budget. However, he pointed out that Bangladesh, which is a similar market, earned about half of that amount.

Talking about other issues discussed in meetings with government officials, he said the government should also think about extending the licence period from 15 years to may be 20 years.

There is probably a need to revise how the government is thinking of distribution of megahertz (MHz) of spectrum, Baksaas said and added 30 MHz, which is up for sale, is a very small quantity for a market like Pakistan.

Expressing his feeling about the trip, Baksaas said every one – the government and the industry – is excited about bringing the technology to Pakistan. “We are hopeful that the government will take our views into consideration while preparing the final package,” he said.

Published in The Express Tribune, January 18^th, 2014.

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