3G Prospects for Telenor Pakistan

telenor_logoIn our ongoing commentary on 3G, today we will discuss Telenor Pakistan and its chances for upcoming 3G license auction on March 29th, 2012.

Many of you will agree that Telenor Pakistan is hot favorite to get a 3G license, rightly so, for the kind of attitude they have developed over the years, it looks apparent for them to have a 3G license in the auction.

In fact they were first one to think of up grading their network to support 3G. Currently Telenor Pakistan is number two cellular operator in the country, having around or over 28 million subscribers – that’s 5 million short of market leader, Mobilink.

Through off the record interviews, I can tell you that Telenor wouldn’t want 3G auction to happen, that’s like any other operator, but if government manages to throw 3G at operators then Telenor will grab it at any cost. At any cost means “Strictly at any cost”.

Telenor is hoping that highest bid for 3G wouldn’t top $300 million. Anything around $250 million to $270 million will be a fair deal for them. No foreign operator in 3G bidding would be another ideal situation for Telenor.

Security Concerns:

Along with investment plans, Telenor is also evaluating recent terrorist attacks plus the political instability in the country.

In fact Jon Fredrik Baksaas, CEO, Telenor Group, just recently noted: “Pakistan has a phenomenal underlying growth factor”. However, he said, it’s in a way a pity that a huge flow from the country is dominated by more challenging factors. Mr. Baksaas explicitly mentioned the criminal attacks on Telenor franchises while hoping that security situation will move positively in 2012.

Otherwise Telenor management is contented with its Pakistan’s operations, financial results and the way it is growing. Meaning that they can inject high value of money into Pakistan, however, with given scenario they will keep the pockets tight.

Indian Exit

Couple of media reports recently hinted that Indian exit will make it more viable for Telenor to invest in Pakistan. But that’s not the case. Telenor told me that they see Pakistan as a separate business case.

Telenor will invest in Pakistan regardless of what happens in India. But Telenor officials agreed that group is very careful after Indian 2G scandal, and wouldn’t want to be in same situation again, ever.

Issues due to Common Ownership at Parent Groups

Having said this all, a recent development at VimpelCom may entirely change the outcome of 3G auction in Pakistan. According to details, Telenor Group last week bought 234,000,000 VimpelCom preferred shares from Weather Investments to increase its voting rights at VimpelCom from 25.01 percent to 36.36 percent and to become majority stake holder in VimpelCom.

This transaction will translate into a situation where Telenor Group will have significant stakes in Mobilink. How much? let’s find out:

  • VimpelCom holds 51.7 percent rights of Orascom Telecom
  • Similarly, VimpelCom holds 51.7 percent rights of Mobilink
  • Telenor Group holds 31.66 % economic rights and 36.36 percent voting rights in VimpelCom
  • or Telenor Group holds 31.66 percent out of of 51.7 percent economic rights of Mobilink
  • or Telenor Group holds 16.32 percent economic rights in Mobilink

Not only this, 5 out of 11 directors in VimpelCom comes from Telenor Group.

I am wondering if CCP will get into it at all or they are done after the earlier clearance they gave for the VimpelCom-Orascom merger.

Possible Disqualification for 3G Auction:

Unfortunately, we don’t have a protocol to follow here, as PTA’s Information Memorandum doesn’t clarify if two bidders are having common directors at holding level.

Clause 7.8.1 of PTA’s IM for cellular license auction says:

All bidders must disclose their ownership information in a separate
sheet. No two bidders shall have any common directorship on their
respective boards.

PTA is reportedly in process of looking into matter, i.e. about having common director at holdings. They will of course consult the industry stakeholders to make sure that there’s no conflict of interest or monopoly situation due to to common directors at parent group level.

Just to let you know, Information Memorandum can be updated anytime. Check below clause 11.1 and 11.2 from IM:

PTA reserves the right, in its sole discretion, to take any action, including amendment in this IM, which it considers necessary to ensure that the Auction process is carried out in a fair, open and transparent manner, in accordance with law and discourage collusion and predatory bidding that may block the entry of potential bidders into the bidding process.

PTA further reserves the right to modify or terminate the Auction process at any time in its sole discretion. In such an event Bid Earnest Money would be returned to the Bidder within thirty (30) working days without bearing any liability.

I am not saying that Telenor and Mobilink both will get disqualified, but this can be one of potential outcomes due to their common interests at group levels.

A Telenor official told me that Telenor Group and VimpelCom has this understanding that if two operations arise conflict of interest in same market (due to common ownership) then the newer operator will have to quit the market or otherwise newer operator will have to merge into older operator.

Hint of a merger in near future – all speculations, I would say, at this point of time.

Just to let you know, one bidder can buy two 3G licenses.

Time left for 3G auction is too little for all this to get concluded. PTA might need to revise the timeline for 3G auction, which evidently they will, or they can possibly go ahead with auction without disqualified operators.

Let’s wait and see how all this unrolls in coming two months.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK


  • Saeed

    Hope Telenor will get the license soon.

    Any expert can tell if 3G launch in Pakistan then what Rently charges etc to avail this service.

  • Well informed person

    Admin,

    Total biased article. You forgot the most important thing in the article as Telenor major hurdle for 3G. Telenor has braced itself for ZTE swap from NSN with already on going managed services to Huawei. As ZTE would swap their network in four year span along with managed services so clearly Telenor has to launch 3G services on NSN. NSN is already exploiting this fact and they have raised their frame agreement price and Huawei is also going for arbitration court due to conflict of interest created by managed services project and now awarded to ZTE.

    • Insider

      Apparently you know nothing, working only on speculations..
      “ZTE would swap network in four years..” contract is to do in two years…
      “telenor has to launch 3G services on NSN…” no such compulsion, infect telenor will not upgrade current NSN equipment to 3G because its not energy efficent…so no point in exploiting.
      “…on frame agreement price”, Telenor is no longer in contract with NSN for MS…

  • UK

    “Just to let you know, one bidder can buy two 3G licenses”. Aamir bhai, this is simply unfair!!!! PTA should review their auction policy. Isn’t it?

    • Abdul

      “One bidder can buy two 3G licenses” is not correct information. Actually, there are three blocks of frequency spectrum offered for 3G spectrum auction and under the IM interested parties can bid for two blocks of frequency spectrum. It does not mean that two 3G licenses shall be awarded if anyone win two blocks of spectrum instead in this case a 3G licensee shall have two blocks of spectrum.

  • Usman

    Interesting analysis. Lets see what happens :))
    All I want right now is a mobile connection with 3G support.

  • shariq

    Great analysis, efforts are much appreciated :-)

  • aleena

    “one bidder can buy two 3G licenses” it means e.g if ptcl get 2licenses then 1 will be used for ufone for 3g handsets and 2nd license will be for 4g lte which will provide broadband for home n office users through usb modems or desktop modems like wimax but with higher n adavance network, i hope same happen here

  • UK

    Whichever company A or B gets two licenses, I damn care. But will it not create monopoly for that teleco operator in the Pakistani telecom market? This seems to be unfair!!!!

  • AM

    PTA is simply good for nothing! Auction is due on March 29 and it looks that they are confused yet. PTA should postpone the auction and review their Information Memorandum.

  • Zaffar

    Very good article. That’s what we require from Aamir. Only posting package details won’t help as the person reading that here can see it on telco website. Here we need research based and in depth news and views

  • $10 Billion Impending Scam – An Open Letter to PM

    Honourable Syed Yusuf Raza Gilani,
     
    AoA.
     
    It will not be out of place to begin with a news item published in the news papers today i.e., Wednesday 1 Feb. 2012, stating that the Indian Supreme Court warned on Tuesday that corruption posed a “grave danger” to the world’s largest democracy quoted as below.
     
    Quote ” Today corruption in our country not only poses a grave danger for the concept of constitutional governance, it also threatens the very foundation of Indian democracy and the rule of law.” Unquote. The above was said by Justice A.K. Ganguly, while delivering a ruling in connection with the alleged underpriced selling of telecom licenses, which the national auditors says may have cost the country up to $39 billion.
             
    An excerpt from a Times of India news published on Wednesday, 2nd Feb. 2012 is also given below for the information of Mr. Abdul Hafeez Sheikh, Finance Minister of Pakistan, who says he expects only $800 million from the COMBINED telecom auction of 3G, (4G LTE) and (5G LTE-A.) (India got IRs.69,000 Crores for ONLY 3G, exactly two years ago, as per TOI news quoted below.
     
    “The 122 licences were given by Raja for over Rs 9,000 crore, while 3G auctions for a smaller number of licences had fetched the government a sum of Rs 69,000 crores.”
     
    In the same context of selling of telecom licenses in Pakistan, a mega scandal is also brewing, for which your kind attention is invited to immediately intervene, so that the nefarious designs of  unscrupulous elements to defame the PPP and its government, is nipped in the bud.
     
                                              DETAILS OF THE CASE  
    With the recent publication of the advertisement of PTA  in the news papers for “Invitation for Expression of Interest” (EOI) with application for AUCTION of Mobile License/Spectrum (3G/4G/LTE [long term evolution] etc), the following questions needs answers to safeguard the national interest by all and sundry.
     
    1. Why the LOW base price of US $ 155 Million for one Mobile Cellular License/Spectrum (800 MHz), when this license was sold for 291 US $ Million eight years ago in the year 2002? OK, it is being auctioned for 8 years instead of 15 years, but is there no premium for above 68 % mobile teledensity which was not there eight years ago?
     
    2. Why the license will be technology neutral? Which means no licenses will be required for any future launches of 4G, 5G so on so forth. this also means selling all future long term evolution inductions free of cost. This happens no where in the world. Even in Pakistan when 2G was sold in 2004, it was not permitted to launch 3G without fresh license. So why now 4G onwards is being sold free of cost?
     
    3.i. Why the LOW base price of US $ 210 Million for the auction of Three Mobile Cellular Licenses/Spectrum (1900/211MHz/3G/4G/LTE etc.)? 
     
    3.ii. Here it should be noted that 2G license was auctioned by PTA in 2002 at US $ 291 Million, when there was much less teledensity than 68% as of now and in the next 15 years (the period for which new licenses are being auctioned), it will obviously increase to higher levels. 
     
    3.iii. And above all this auction is technology neutral, which means license for 3G is also valid for FREE for 4G, 5G onwards. Under this situation this base price of US $ 210 Million is ridiculously low.
     
    4. As per IM (Information Memorandum) on PTA website all three telecom companies winning the technology neutral AUCTION of Mobile License/Spectrum (3G/4G/LTE [long term evolution] etc) will be required to pay half of the bid value within 30 days in USD or PKR. Also Rest of the amount can be paid in USD or PKR in five equal yearly installments. This virtually means that Telecom companies will NOT bring any fresh foreign investment and also the remaining 50% amount will be deposited on PAY AS YOU EARN basis. This tantamount to robbing the nation of valuable FDI in the garb of auction terms, particularly when bidding is only allowed in minimum 2 million USD and maximum 10 million USD. So when bidding is in USD payment should also be in USD.
     
    5. Why PTA has shown less figures of total Teledensity of Pakistan (68.39) in 2010-11 at para 3.7 of (IM [information memorandum] on its website) whereas, according to its own figures in the graph shown in  the para 3.7, the total comes to (68.43)?
     
    6. Why the PTA advertisement published in the news papers of 24 January, 2012 states mobile teledensity as 62% against the figures of 64.9% shown in IM at their website? 
    7. India got IRs.69,000 Crores that too, two years ago, from it’s auction of ONLY 3G. Why our Finance Minister has kept a budgeted amount of ONLY $800 million as expected income from the auction of NOT only 3G but 4 & 5G as well?
     
    Submitted for consideration and immediate corrective action before it is too late.
    ————————————————
    It was reported recently on a TV channel, that Finance Minister Abdul Hafeez Sheikh expects 800 million USD revenue, from the auction of 3G (fast Internet) license to telecom companies.
     
    It is reported that government has fixed the base price for auction to held on March 28 and 29, 2012 for 3G and 4G as 210 million USD. Whereas, 8 years ago 2G was sold at 291 million USD. (Please check and confirm this data from PTA).
     
    Here, I must forewarn all and sundry, that under no circumstances, the worth of this auction amount can be less than 10 billion dollars. India got 69000 Crores  from the same auction in April 2010 i.e. two years ago. Details are available at link:- http://www.snayyar.com/3g-telecom-technology-pakistan-can-earn-billions-of-usd-by-just-selling-air.html.
     
    It will not be out of place to state that as reported today i.e., Wednesday 1 Feb. 2012 the Indian Supreme Court warned on Tuesday that corruption posed a “grave danger” to the world’s largest democracy quoted as below.
     
    All patriotic citizens and institutions must be alert, lest we may not be cheated again, by those who sold our valuable national assets, for even less than the peanuts, in Musharraf era.
    … other posts by Syed Nayyar Uddin www.snayyar.com

    • Random

      You just forgot to mention that India has
      – 10 times the population of Pakistan

      In Simple terms it would mean more users per company / license.

      In addition to this – India also has
      – A stable growth
      – No Security problem

  • Telenor is laadli company for Pak Govt as Pak tries their best to make it good with international investors.

  • Abdul Rauf

    what about Mobilink guys?

    I think those 3 operators would be Mobilink, Telenor and Zong!
    in regards of charges my forecast says that it would be available initially for the PostPaid subscribers and will cost between 2000 to 2500 per month.

  • nadeem

    what is the benifit for common people?
    is 3g mobile nececssary for 3 G net work?
    please tell me some one

    • Zulqarnain Nizamani

      yes

    • Nadeem

      No. It’s not a minimum requirement, your phone and GPRS will still work in case your handset is not capable of running 3G data speeds.

  • Salman Ansari

    A very good article by Aamir – as usual. Pro Pakistani has become a bench mark for Telecom news and analysis. Well done!

    It is also interesting that most of the comments are of a good quality and thoughtful. Some may miss the mark but it shows that, like the market, the commentators are maturing.

    On a personal note, I think that that instead of the preoccupation with what we may gain out of the Auction (the money will be wasted before it hits the ground!) we need to be looking at obligations, quality, coverage, time lines and obligations to move to new technologies.

    Broadband is not understood by the cellular operators as they are still voice centric and it shows the way Data is stifled over the voice requirements. Once these operators can make the revenues for Voice = zero and as an add-on in their Business case and see how to exploit the market, you will see a paradigm shift.

    PTA and the Operators need to get over their obsession with VoIP as being the cardinal sin and let WiFi thrive without constraints.

    The licensing should be in the context of a proper Broadband Policy, which has an ownership of not just the few in the Official circles but the end users as well. The existing BB policy (http://www.fab.gov.pk/documents/Broadband%20Policy.pdf) was flawed from the start and despite asking for inputs were never included.

    As far as looking at 3G..nG I feel that we should stress for going for the emerging technology like LTE rather than the ones at the fag end of their life cycle, otherwise Pakistan will be stuck with investments and the growth of true broadband will suffer.

    We made a huge error in the way we handled the PTCL sale and must learn from it.

    My two pennies!

  • Shahid D.

    Nice to read this thorough article, i wish more articles are like this. Good Job, keep up.

  • naqeeb

    hi
    guys
    why telenor do not very soon
    why
    tell me some one plzzzzzzzzzzzz sooooooonnnnn

  • naqeeb

    why telenor do not tell us very soon

  • inshallah telenor will get the license. they have already installed 3g routers i.e signal booths in Pakistan they just need to open it as they receive the license. telenor will steal the market in near future. i interviewed them. they said that apart from that they are working in 4g technology and will come up to a result with in 2 to 3 weeks.

  • inshallah telenor will get the license. they have already installed 3g routers i.e signal booths in Pakistan they just need to open it as they receive the license. telenor will steal the market in near future. i interviewed them. they said that apart from that they are working in 4g technology and will come up to a result with in 2 to 3 years.

  • faiza

    plz introduce 3g in pakistan…..

  • Sayyed Rizwan ali

    I’m in favor of 4G but 3G won’t be bad..