Is Etisalat a Hurdle in 3G License Auction?

Confusion is prevailing over 3G license auction and it’s potential blockade due to SPA (Sale Purchase Agreement) of PTCL’s 26 percent shares.

Based on facts we had obtained through a source – we were first to uncover this theory back in November 2009 but we were never clear about this as we hadn’t seen SPA ourselves. Neither Etisalat nor the Government of Pakistan ever made this clear to us or anyone till date.

It is anticipated that Government of Pakistan can not issue any new telecom license for 7 years, i.e. till March 2013 based on terms signed in Sale Purchase Agreement of 26 percent sale of PTCL shares. While others opine that this limitation applies to LDI license only and not the 3G licenses.

But now it appears that the government of Pakistan is hurdled to auction any new telecom license due to sale purchase agreement it signed with Etisalat.

In fact Government of Pakistan itself is not cent percent clear about the terms it agreed in SPA. For instance just yesterday, Mr. Saeed Ahmed Khan, secretary Ministry of Information Technology was quoted by “The News” as saying:

Khan said that there were different views on interpretation of agreement with Etisalat in case of selling PTCL as it did not bind the government as regards 3G license.

When his attention was drawn towards the viewpoint of other ministries, he said that Etisalat deal only bound the government not to move ahead with license of LDI till March 2013.

Just one day later media produced another story which is a total contradiction of what Mr. Khan had said. Citing sources, a report published by Express Tribune said:

Sources said that there were differences over the interpretation of an agreement between Pakistan and the international telecom player reached at the time of the sale of shares of the state-owned telecommunication company.

The telecom giant was of the opinion that Pakistan could not sell a new telecom license for any spectrum until seven years, which would end in March 2013.

It’s amazing that we are getting different opinion over the same issue from government officials in matter of just two days. Express Tribune further says:

The government has taken the position that 3G license is not something new, but actually an extension of existing services. It has also a different interpretation of the time limit.

It’s not about taking the position, its about what you agreed with Etisalat while you were selling the telecom gold mine?

Here are million dollar questions, that the people of Pakistan are asking, and government must respond to these:

Question 1:

Why sale purchase agreement was never made public? After all PTCL is a public limited plus government owned company and people of Pakistan need to know the facts, it’s their basic right.

Question 2:

If this limitation of not auctioning any new license for seven years was indeed agreed and signed then who is going to be questioned (maybe legally trialed) for this blunder? Who will pay the compensation for the loss that people of Pakistan will bear? the loss that private companies will bear?

And by the way Etisalat can approach arbitration court if Government of Pakistan tries of auction 3G license despite agreeing to not to sell any new license till 2013.

Read this article in Urdu

Tech and telecom reporter with over 15 years of experience, he works as founder of ProPakistani.PK

  • Good article. Private companies were hindered from deploying telecom services because of the agreement. Anyway even if the government pushes through with the auction of 3g, wll or ldi, the cellcos have a strong case of over competition and block this till 2013. The best the GOP can do now is just wait till 2013 and give licenses for 4G and skip 3G altogether. This will propel us into the future and people of Pakistan will get the latest technology then. By 2013 4G technologies such as Wimax 2.0 and LTE ecosystems will be mature.

  • Very good Aamir bhai, I feel complete ban on VoIP and now VPN which is also expected in Pakistan, is exactly the same as we see by Etisalat in UAE.

  • The SPA says no additional licenses and the meaning is as clear as it is read.

    The problem comes with GoP’s infatuation of making money.

    Ideally 3G should be done through spectrum auctioning to existing elgible mobile operators. Since they are not too keen the GoP wants to sell it to other than mobile licensees where this agreement stops them to issue additional fixedline and mobile licenses.

    For GoP it is not 3G but money and that is why the confusion is there because GoP doesnt want to share the risks with existing mobile operators by entering into revenue haring model and instead wants to do an auction and make as much money that it wants.

    Data services are literacy and affordability driven and should be distinguished from the mobile licensing done in 2004

    • Absolutely…
      They are observing India where the 3G has become the bottelneck for teleco’s are they are trying to cover their heavy investments for purchasing license and installing hardware across the country.. but there are not enough users of 3G…

  • Amir

    I have the SPA and it does not say anything like that.

    The real story is that Etisalat made a blunder in quoting twice the value of what it should have. They used a share rice of Rs 120 when the shares were less than Rs. 15. Many people were fired at Etisalat.

    China Mobile was US$1.1 B and Singtel was about US$ 1B.

    Etisalat wanted to back out of the deal, but our very dear Shaukat Aziz went begging to them and agreed to very silly terms (this document is 90% property addresses, only 1/2 page of Telecoms, nothing of obligations (we had pressed the MoF to have these inserted but Shaukat was too busy doing his stuff).

    Etisalat bid US$ 2.4B. Half to be paid up front and the other half (now hear this!) from the revenues earned from Pakistan! What a foreign investment!

    Etislat has defaulted on later payments stating that until all the properties are made over to them they will not pay.

    The original team of the privatized Etisalat comprised of the old PTCL guard who had no experience in a competitive market and influenced the Etisalat Arabs to ask for stoppage of all new licences (this was after the Agreement was signed). This was patently against the De-regulation policy (I headed the team that wrote it) but with a wink and a nod the Government agreed.

    It is not a part of the SPA or any agreement made at the time of the sale. I am willing to participate in any effort to get clarity on this issue as this privatization has been a calamity.

    After the takeover Etisalat (the Arabs) had zilch experience in running a company, period. the Pakistanis and Indians and other expats were doing this there. A gentleman whose only claim to fame was running the Etisalat Call Center was made the CEO of PTCL and rest is history.

    As a Pakistani I feel very strongly that we are constantly being taken for a ride by outside forces but more painfully by our own. due to incompetence or just sheer ulterior motives.

    If the PTA would really stand up and look at the state of where Telecoms is going after such a promising start, they should have clear regulatory interventions to clear the path.

    The objections to the 3G licences were the existing cellular operators who had the first right of refusal and had blocked this because they needed a ROI on the existing investments. Pakistan be damned!

    The issues now are not just getting clarity on what is blocking this licencing but to:

    1. Resolve the issue whether 3G is till the way to go? Will it be better to embrace 4G and LTE?

    2. Are the requisite band of frequencies available and if not, will the other users be persuaded to get off these for a better good of Pakistan?

    3. The LMDS frequencies (250 MHz of these) be taken away from the person who acquired it 20 years ago (YKW!) and be auctioned so that true Broadband can come to Pakistan?

    Salman Ansari

    • DEar Mr. Ansari,

      Even if it is not in the SPA GoP’s decision is very much available with PTA. It was either a CCRB decision or a decision at some other forum why else Zong hasnt been gven the LDI license?

      I agree with your story about the privatization. Everyone knows that. I am amazed why you havent dared to mention the name of the leader from GoP at that time? Hafeez Sheikh was the leading begger for this transaction.

      It is not how we begged for the privatization more about the commitments we gave to Etisalat and that is the reason i mentioned that it is new licensing for 3G that is a problem.

      If the GoP wishes to offer 3G to exisitng mobile operators there is no such commitment with Etisalat that binds it to not offer the spectrum to existing operators.

      Auctioning/allocating spectrum is doable bu issuing a license is not under the agreement with Etisalat.

      • Unfortunately like a great storyteller the issue of 3G shouldnt be confused with the privatization and performance of Etisalat in runnig the PTCL. I dont disagree with you on many aspects as these concerns were ignored by the grt Dr. Hafeez sheikh when he was begging Etisalat for privatization of PTCL.

        The basic problem is that GoP wants to auction and make money whereas the existing operators do not see as much potential that could compensate the auction money.

        So the solution lies with GoP to comeout with an investor friendly mechanism that shares the risk of market potential. Telenor and Warid have done an amazingly wonderful job in Pakistan but their investors are waiting to reap the returns so we must not ignore these legitimate concerns through emotional outbursts.

        3G 4G or whatever broadband revolution we want to bring in Pakistan will only come if

        The spectrum is offered on
        1. risk sharing basis
        2. Literacy is improved
        3. broadband for devp as a strategy is implemented to enable spheres of the society in doing things the broadband way.

        Let’s not blame Etisalat for our shortcoming and even the past govt for a stupid privatization.

        3g or 4g/LTE can be offered all that is required is a the zeal and commitment that shows the understanding of what broadband can do for the country in the long run

    • It is really a sad reality that how brutally the instituions were being destyroyed in our country.

      The deal of etisalat ptcl take over is all fraud.

      even now when after they haver taken over ptcl by hoot or by crook, the salaries are not good enough.

      what a shame of the rich people of Arabia that they after taking over the ptcl could not make benefit to any one .

  • Pakistan has suffered enormously because of non issuance of 3G services. Pakistan was once presented as an example of rapidly advancing modern telecom technologies – but now this country is among the backward telecom technology countries.

    Many smaller and much less significant countries have 3G technologies and advanced countries are already commercially selling services of 4G. By March 2013, Pakistan will be in dark ages. This because of the cohorts of Pakistani’s bribe-seeking officials and bride-giving (in different forms) by Etisalat.

    Only a month or two ago, Indian press reported that their government threw into jail local Indian tycoons who were used by Etisalat India’s local companies to bribe Indian officials to gain unfair advantage for share purchase of telecom shares in India.

    By the way can ProPakistan confirm if Etisalat ever paid the full price for purchase of PTCL? What happened to the one billion dollars they owed to Pakistani nation?

    • Etisalat owes 800 million dollars and is not paying the money, due to non-transfer of some lands from government of Pakistan to PTCL.

      In short, they paid 1.4 billion dollars – rest was to be paid from the revenues from PTCL (Like Salman Ansari said above) but those installments aren’t paid as well. Government is like begging from Etisalat now, they even asked Etisalat could pay just 500 million dollars and rest will be waived off… Etisalat didn’t listen to that too.

      • this is what happens when you beg for privatization.

        This is what happens when you dont deliver on your commitments

        this what happens when returns business reality is not as good as projected by the financial consultants

  • I disagree that Pakistan will be in the Middle ages for several reasons:

    1. Spectrum in Pakistan in 1.9ghz and 3.5ghz can be used for LTE. Operators who have this spectrum like PTCL, Supernet, DVCOM, Mobilink, Wateen, Witribe, Augere can bring LTE there. In my opinion, there should be some consolidation to stop the over competition and pool resources for 4G deployment.

    2. Witrbe, Wateen, Infinity, Augere and PTCL (which has already done LTE trials) are in unique position to capitalize on 4G opportunity.

    3. Existing cellular spectrum in 800mhz and 1800mhz can be refarmed later and given to existing cell companies for 4G. Another little known secret is that the Instaphone spectrum can be used for 3G. An interested operator can be bought by any operator willing to pay the renewal license fees to unsuspend the license from PTA

  • One more point sorry.

    4. Please everyone also acknowledge that PTA and GOP have turned blind eye to PTCL and other 1.9 GHZ and 3.5GHZ operators about limited mobility clause which was part n parcel of the wll licenses. This is reason why PTCL and other operators are allowed to launch 4G tablets.

    All I’m trying to say is that we should not consider existing watch and hold situation as much of a hindrande to 4G in Pakistan. If one allow existing market forces to work, there will be much needed consolidation in broadband space (like there should be for cellular industry). One can see some consolidation like PTCL buying Max com and now DVCom, Mobilink buying Dancom and World Online, Witribe buying Augere, Telenor buying Warid etc. I am quite sure if this continues 4G will flourish in Pakistan.

    Artificial technology barriers like VOIP needs to be removed though.

  • Aslam o alikum,
    No doubt it can be very usefulr public that a new telecom opreator comming pakis0an, Because accordind to my thinking, all opretors like mobilink etc failed to provide satisfectory services in pakistan, mobile phone becoming very cheap services going zero, so new opreators should be come,

  • Salman Ansari does not have the updated SPA. It clearly states that no new cellular, LL, LDI licenses be given out (watch and hold situation) for 7 years from SPA signing.

  • The crime of selling Pakistan’s Telecom. Gold mine in a greedy manner taking kickbacks by previous government will continue to give extreme loss to Pakistani nation.The SPA is a pool of blunders but unfortunately neither government/judiciary nor opposition & madia are highlighting this due to their wested intrest in UAE.May God help Pakistan to get rid from Etisalat

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