Imagining a Life Without a 3G License!

The whole nation is gearing up to embrace the 3G and 4G technology, which has been a long time coming in Pakistan.

The government is hoping to pump up the economy through the auction, the telecom operators aim to boost up there profits by providing the 3G/4G service, and cellular users are looking to end their long wait to experience high speed mobile internet.

While there is no doubt that 3G/4G technology should have been rolled out at least a couple of years ago; the impending question here is, what is next for telecom operators who fail to acquire the 3G licence?

The overwhelming belief or assumption is that these operators will die a slow death by losing their customer base.

However, what we need to consider here is that 3G/4G technology is only useable on smartphones and SIM enabled tablets. Wireless Broadband Dongles are likely to surface in couple of years at least.

While the exact number of smartphone users in Pakistan is unknown, surveys have claimed that merely 3% to 5% of Pakistan’s mobile subscribers own a smartphone.

What this essentially means is that telecom operators who fail to acquire a 3G licence in the upcoming auction can survive, as more than 90% of mobile users in Pakistan will not be using the 3G/4G technology. On day one at least!

This will, however, result in a loss of profit for these operators. Loss in profit, if we may speak casually, is the potential revenue that operators without 3G licenses are going to lose.

Everyone is familiar with the fact that ARPUs in Pakistan market (for voice and VAS) are dirt low. However, mobile broadband is the segment that telcos are eying now to boost their ARPUs to considerable levels.

Adaption rate for next-gen services is likely to remain high, or if we put this in other words then the numbers of smartphone users in the country is expected to rise after the 3G technology rolls out. This will result in a further decrease in profit for operators who will not be able to provide this technology to its customers.

However, we will have to wait and see how many users shift to smartphones to experience 3G/4G technology, keeping in mind that these services will not be financially viable to most mobile users in Pakistan, one can expect that Voice and SMS revenues are going to remain intact or few years at least.

Operators without 3G/4G licenses will further rely on offerings to lure voice/texting needs of the customers. There are more than 130 million of them, and its a huge figure to keep pocketing the voice segment only.

Operators without 3G/4G licenses may face image and branding issues, but that won’t matter for millions of customers who will get cheap calls.

Another important aspect to consider here is that this will not be the only auction of the 3G/4G technology that will take place in Pakistan. Meaning that operators without 3G are not going to dry down completely without getting another chance in just a few years from now.

Telecom operators who fail to acquire a license during the 23rd April auction will get a chance to test their luck in the next round of auction for 3G and 4G licenses. Of course we can’t say any word about the timeline of the next auction.

The upcoming auction only allows three telecom operators to attain the 3G licence. Out of these three operators, two can go on and win the 4G licence. Only operators who acquire the 3G licence will be eligible to bid for the 4G license.

These are exciting times for Pakistan’s telecom sector. We hope that the auction goes smoothly and we get to experience the long awaited 3G/4G service.