The auction for next generation network spectrum (3G/4G) may not be held as per the schedule formulated by the government. The reason behind the delay stems from the fact that InterConnect Communication, the consultants hired for the auction, have painted a bleak picture of market readiness for another 3G/4G auction, according to sources privy to the matter.
According to Pakistan Telecommunication Authority (PTA) sources, consultants have completed an assessment of the market after holding a series of meetings with various stakeholders, including telecom operators in the country.
Based on findings, the consultants have prepared a report and submitted it to the Evaluation Committee of the Authority.
The Committee, after evaluating the submitted report, will take a final decision concerning the 3G/4G spectrum auction.
Well-placed sources at PTA revealed that the consultants have assessed the market potential for spectrum auction, existing market players, their problems, revenues, investment and auction objectives related to telecom sector growth and revenue.
The summary of this report indicates that five telecom players are already operating in the market with low margins and huge competition.
Moreover, operators’ intent for investing in the spectrum is lacking and any auction within next 12 months could not bring any notable participation from local operators, said the report filed by consultants.
It may be recalled that telecom operators, during their meetings with the consultants, had expressed concerns over high taxation, low investment return, high costs including energy crisis and low economic growth in the country.
They had further informed the consultants about their commitment of major investment in the NGMS auction held in April 2014.
During the last auction process in April 2014, the government had assured the operators that major challenges faced by the industry would be addressed on a priority basis. However, the promises made during the auction process remain unfulfilled till date.
During this period, the issues faced by the industry have increased manifold instead on account of adverse changes by the government in taxation, security related compliance and other related matters.
The situation became further worse for the government after the Mobilink-Warid merger. If the merger gets approved, Mobilink will not need to participate in the upcoming 4G license while Zong is already carrying both 3G/4G licenses.
The government had 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.
The Finance Ministry is allegedly stressing the need for the Ministry of Information Technology and Pakistan Telecommunication Authority (PTA) to expedite efforts for early auction of the remaining spectrum. However background interviews with 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.
However just last week, Anusha Rehman, Minister for State for Telecom and IT, told this correspondent that government is hopeful to complete the auction of 3G and 4G spectrum during current financial year (by June 30, 2015).