Mobilink-Warid Merger Further Diminishes Govt’s 3G/4G Auction Plan

Yesterday’s merger of Mobilink and Warid has further thrown a wrench into government’s plan of going for the remaining spectrum auction as, after this new development, there remains scant chance to complete the process in near future, revealed background interviews of telecom experts.

While operators were already reluctant to go into upcoming 3G/4G auction, this new development has only added more hindrance in government’s plans.

Telcos Clearly Tell PTA about Not Participating in Auction

Cellular operators have informed the government in black and white that they are not going to participate in the auction process.

In a joint letter signed by telecom operators including Mobilink, Telenor, Ufone, Warid and Zong, which was sent out to Pakistan Telecommunication Authority (PTA), a copy of which is available with the ProPakistani, states that the Cellular Mobile Operators (CMO) had committed major investment in the NGMS auction held in April 2014.

During the auction process, it was assured by the government that the major challenges faced by the industry would be addressed on priority basis.

“However, we regret to inform that all the promises made during the auction process remain unfulfilled till date,” the letter states.

On the contrary, in fact, the industry problems have increased manifold in the post auction scenario on account of adverse changes by the government in taxation, security related compliance and other allied matters.

Letter further said that since telecom policy is also in the making for a while now and some of critical ancillary matters such as licensing framework and other spectrum related rights and obligations are still not clear, it will be hard for operators in making an informed decision for investing in the sector through spectrum auction.

According to the letter, the problems faced by the industry have time and again been shared with PTA, Ministry of Information Technology, and other concerned authorities including right of way problems faced by the industry, minimum tax at rate of 8 percent, taxation on data services, industrial undertaking for cellular mobile industry, elimination of reduced rate customs duty benefit at import stage, and imposition of sales tax on sales tax on supply of SIMs and other allied matters through several communications.

“We through this letter once again want to clarify that it might not be possible for the existing CMOs to commit any investment in the spectrum auction unless our problems are addressed on priority basis”, said the official letter.

The industry raised the issue of external interference due to jammers installed in different jails across Pakistan and communication in this regard was shared with the PTA via an industry letter dated April 30, 2015.

It was clarified during the consultation process that expression of interest in auction and technical consultation is subject to commercial viability of any such initiative.

And Now Mobilink-Warid Merger

The situations became further worse for the government after Mobilink merger with Warid. Mobilink will now not need to participate in the upcoming 4G licence while Zong is already carrying both 3G/4G licenses.

And for Telenor and Ufone it might not be a viable option to go for 4G license, said industry experts.

Sources further confirmed that Interconnect Communication, a U.K based firm, was hired by the Pakistan telecommunication Authority (PTA) to assess market demand for 3G/4G spectrum. The firm has held initial meetings with some cellular companies, but did not get satisfactory input.

The government budgeted Rs 56 billion for 2014-15 and showed it as realized in the revised estimates for 3G/4G auction that never took place. For 2015-16, the revenue from 3G/4G auction has been inexplicably raised to Rs 65 billion.

Finance Ministry is allegedly stressing the Ministry of Information Technology and Pakistan Telecommunication Authority (PTA) to expedite efforts for early auction of the remaining spectrum. However background interviews of different telecom operators revealed that market is not ready for the auction due to heavy investment after the early 3G/4G auction, SIMs verification through biometric system and heavy taxation on mobile internet and data services.

PTA has planned to hire a second consultant for marketing to attract new investments in the spectrum auction. They would further require effective marketing to ensure participation of new entrants in the auction in accordance with the scope provided in the RFP. However the consultant against the service is yet to be finalized. According to the conditions the consultant will work till the completion of auction process.