3G auction may affect growth: experts | Pakistan Press Foundation (PPF)

Pakistan Press Foundation

3G auction may affect growth: experts

Pakistan Press Foundation

LAHORE: The government’s plan of auctioning next generation spectrum (3G-4G) for telecom services could hit the future growth of the most vibrant tax generating service sector of Pakistan as the government is considering granting only three licences in this category.

Experts of the telecom industry who previously served in Pakistan Telecommunication Authority (PTA) at senior levels and policy making positions believe that the issuance of just three licences for 3G-4G spectrum will bring on a repeat of what happened with Instaphone. [The company closed shop after the induction of 2G spectrum in Pakistan as it was unable to compete with the new players who entered the Pakistani cellular market.]

These former officials, who refused to be identified, think this three-licence plan will eliminate two of the existing five players from the Pakistan market in the next three to four years. At present, five international cellular services providers are operating in Pakistan, of which one has been up for sale for the last three years or so.

According to these experts, given that the company for sale is heavily indebted, it is virtually impossible for it to bid for a new spectrum licence worth an estimated $400 million. (As per its budget estimates for FY14, the government is hoping to realize some $1.2 billion from the sale of three next generation spectrum licenses.)

“Since one company is already up for sale, there are just four players left in the competition,” reason these experts. “While the government has yet to announce a base price, the budgetary target suggests that each licence will be priced at $400 million, which can limit the interest of the existing four. And then, if only three players get licences, the fourth won’t be able to compete with them.”

International consultants Plum Consulting recently conducted a study on the need for 3G spectrum in Pakistan. And their report says that mobile broadband is a low cost and quick way of achieving mass market provision of broadband, since operators can offer the service by enhancing their existing 2G networks for their existing customer base of 124 million users. However, in order to do so, mobile operators in Pakistan need more spectrum in globally harmonised frequency ranges as mobile broadband services require considerable amounts of spectrum if a reliable high speed service is to be offered.

The spectrum for mobile services in Pakistan is currently limited to the 900 MHz and the 1,800 MHz bands, with a total of 2×70 MHz available shared between five operators. Pakistan is the only country that has yet to issue licences for the 2.1GHz spectrum and the total amount of spectrum assigned in Pakistan is low. As a result, the number of subscribers/MHz in Pakistan is high relative to most comparable countries except India.

While the 900MHz and 1,800MHz bands could be used to provide mobile broadband services in Pakistan, the five operators do not have sufficient capacity in these bands for mobile broadband as well as voice and text services. Comparatively, not only does the 2.1 GHz band offer the additional capacity required for 3G mobile broadband services, it is also used globally and the cost of 3G devices is also falling rapidly.

Meanwhile, sources in PTA say they are only following the directives of the government regarding the auction and claim that it won’t wash out any of the existing players. “Instaphone did not renew its license and closed its business in Pakistan; Paktel renewed its license and upgraded it with 2G spectrum under the name China Mobile Pakistan,” say these officials who’re not authorized to speak on the record. “Thus, even those players who fail to acquire the next generation spectrum licence can make roaming arrangements with the licence-holders and upgrade themselves in the future, whenever the government offers other spectrum. Besides, the PTA will cover such issues under the Information Memorandum, which is in the process of being drafted.”

However, industry experts question the likelihood of these assumptions. “Why would a licence-holder agree to a roaming service agreement knowing that if the competition fails, its customer base will be up for grabs?” they ask. “What we’ll probably see is the licence-holders forming an underground cartel to push out the non-licence-holders.”

Meanwhile, the State Minister for Ministry of Information and Technology (MoIT) Ms Anusha Rehman remained unavailable for comment despite several attempts.

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