New Regulations to Allow Telcos to Trade 3G & 4G Spectrums

Pakistan Telecommunication Authority (PTA) has devised Spectrum Trading framework to allow markets to determine the best use of spectrum.

The goal of the Telecom Policy 2015 with reference to spectrum is: “Allocation and assignment of spectrum to maximize social and economic benefits derived from the use of this scarce resource”.

The Authority has asked all stake holders to provide their input/comments by December 5, 2016.

Section 8.15 of the Telecom Policy 2015 deals with the subject of Spectrum trading, and states that Spectrum trading will be permitted under specific conditions. Spectrum trading occurs through the outright sale of the rights and obligations or term lease, subject to license conditions and approval by PTA / PEMRA under intimation to FAB.

The policy further stares that a spectrum trading framework will be developed by the PTA, PEMRA and FAB, and will be subject to policy level approval by Federal Government (MoIT). Factors like spectrum capping shall be considered while developing such framework.

In relation to trading, the seller will be expected to pay a Trading Fee. A Processing Fee and any other applicable fee will be levied to cover re-issuing of licenses. The decision to trade is a commercial decision for the license holder. The terms of the trade will be a commercial agreement between licensees.

Spectrum will be traded only if the relevant license that contains the spectrum assignment to be traded, permits trading. Spectrum assigned to a licensee without such a permit will not be traded unless Federal Government (MoIT) specifically authorizes the trade as being in the public interest. Nevertheless, spectrum trading will be permitted only for spectrum that has been acquired through a pricing arrangement that represents its market value (i.e. auction or AIP). Spectrum subject to Administrative Cost Recovery or other forms of nominal pricing will not be traded.

According to the policy, Spectrum may be traded between holders of the same license type only. For example, spectrum trading may take place between LL licensees or mobile licensees but not between an LL licensee and a mobile licensee to maintain the basic value of the different categories of spectrum.

Spectrum will not be traded by any licensee with the necessary license conditions until the licensee has fulfilled its payment and roll out obligations unless it also transfers its roll out obligations with the trade and same is verified and authorized by PTA.

The eligibility for receiving spectrum through a trade will be the same as the eligibility for assignment of spectrum by FAB. The acquirer of spectrum will be required to obtain (or already hold) the appropriate telecommunications license and to meet the terms of that license.

The framework for spectrum trading will take into account the effects of such trading on competition, national security, public health and safety, compliance with the national laws and policies and compliance with international obligations and international relations.

Swapping of spectrum will be considered as a two-way spectrum trade subject to approval by PTA and FAB.

Spectrum Trading Framework for Pakistan

The devised framework provides Spectrum Trading Framework, as per Telecom Policy 2015, to the eligible parties to carry out spectrum trading in Pakistan.

This framework focuses on the following points:

• Follow the latest approach; let the market forces decide the best use of spectrum.
• Trading conditions
• Trading types:
  • Outright sale of the rights and obligations
  • Term Lease
  • Spectrum swapping
• Tradable spectrum in Pakistan and categories of trading
  o Respective licenses
  o License holder
  o Spectrum Chunks
• Trading fee (processing + re-issuance fee)
  o It should recover the administrative cost
• Issuance of modified license
• Eligibility criteria for participation in trading
  o (payment + roll out obligations)
• Over riding clause
  o ensure competition
  o national security o public health and safety
  o compliance with national laws and policies
• Swapping of spectrum
  o two-way trade Framework

Framework

Following forms of spectrum trading shall be permissible under this framework:

• Spectrum will be traded only if the relevant license that contains the spectrum assignment to be traded, permits trading. Spectrum assigned to a licensee without such a permit will not be traded unless Federal Government (MoIT) specifically authorizes the trade as being in the public interest.
• Spectrum trading will be permitted only for spectrum that has been acquired through a pricing arrangement that represents its market value (i.e. auction or AIP). Spectrum subject to Administrative Cost Recovery or other forms of nominal pricing will not be traded.
• Spectrum may be traded between holders of the same license type only. For example, spectrum trading may take place between WLL licensees or mobile licensees but not between a WLL licensee and a mobile licensee.
• Outright sale of the rights and obligations (Transfer) : The license spectrum holders may transfer all of their license rights and associated obligations to another party who will also be the valid licensee of the same category. Transfers will be of two types permanent, till the remaining term of applicant licensee; or time-limited. A time-limited transfer shall involve reversal of the original transaction by the transferee after the expiry of the time involved. Both parties will enter into contract agreement to be submitted to PTA at the time of application. With an outright or total transfer, the rights and obligations of the transferor will become now the rights and obligations of the transferee. After such a transfer, the original licensee (transferor) will no longer have any rights and/or obligations under the traded license to the extent of traded spectrum.
• Spectrum Leasing: Leasing is administered by license terms and conditions. A license-holder may grant leases only if the license contains the necessary terms and conditions as provided in this framework. After modification of the license conditions, the licensed spectrum holder shall become eligible to enter into a contract to let someone else to exercise its rights to use the spectrum. With spectrum leasing, the rights and obligations of the transferor will become the rights and obligations of the transferee for the period of lease. After such a transfer, the original licensee (transferor) will no longer have any rights and/or obligations under the traded license to the extent of traded spectrum for the lease period. Sub-leasing to third party is not permissible i.e. licensee A may lease to B, who cannot sub-lease to C.
• Spectrum swapping: Swapping of spectrum is a two-way spectrum trade between both spectrum licensed holders subject to approval by PTA and FAB.
• Interested parties will apply to PTA, under intimation to FAB, on a prescribed form seeking permission for either category of spectrum trading. The application form should be duly signed by the CEO or his/her authorized person. An affidavit shall be submitted in case of authorization. Depending upon the required category of trade, applicants are required to fill the Application for Spectrum Trading form along with the checklist.

• Spectrum holding licenses are allowed to transfer their license rights and obligations to others on terms agreed commercially between them. The following procedure for the transfer shall be followed:

1. The license holders shall submit the spectrum trading application form to PTA duly signed by the transferee and transferor.
2. The information provided on the form will be assessed and considered whether any additional information is required for grant of consent to the transfer.
3. Maximum 75% of total spectrum held by a licensee can be traded. The transferor and transferee both will be in compliance with the prescribed spectrum caps as and when declared from GoP/PTA/FAB.
4. The PTA may seek public opinion from all concerned regarding spectrum trading and its impact on competition, national security, public health and safety, compliance with the national laws and policies and compliance with international obligations and international relations.
5. PTA may require from interested parties to submit within 10 working days details of any concerns they might have about the proposed transfer. f. PTA will have detailed assessment of whether the proposed transfer raises sufficient competition concerns.
6. PTA may require meeting with the trading parties and third parties to discuss issues, if any, related to the trade transfer;
7. The proposed transfer or otherwise on the trade shall be properly notified to the concerned quarters.
8. In case, the transfer is executed, the transferor and the transferee shall surrender their licenses to PTA and PTA will issue new licenses reflecting the terms of the trade.

• The circumstances in which transfers are automatically barred include the following:
  a. Any of the transferor or transferee are defaulters of PTA payments and/or roll out obligations;
  b. In case, any of the transferor or transferee have not consented to the transfer in the form;
  c. In case, some legal proceeding are pending against either of the transferor/transferee;
  d. In case, PTA has not consented to a transfer being made due to any reason and this shall be notified properly by the Authority.
• Trading Terms & Price: The trading terms including price are a matter of commercial negotiation between the parties concerned. However, these should comply with all regulatory requirements as set out in the relevant license conditions.
• A licensee (in case of being a corporate entity) and is taken over by way of share purchase or, if company sells a business by some other way, will require permission from the Authority do so and a spectrum trade filing with PTA under intimation to FAB shall become mandatory.
• PTA shall charge spectrum trade processing fee to recover its administrative costs involved in the processing of the application. The processing fee shall be levied on both transferor and transferee and will be Rs. 500,000/- in case of cellular mobile licensees and Rs. 100,000/- in case of LL licensees. The transferor shall be responsible to clear all its dues prior to finalizing any contract for spectrum trading. After agreement, any dues recoverable up to the effective date of trade shall be the liability of the transferee.
• Spectrum trading shall not change the original period of spectrum assignment as relevant to the traded block of spectrum.
• Transferee will be allowed to use the spectrum acquired through trading based on technology neutral policy.
• The amount received from trading shall become part of Adjusted Gross Revenue (AGR) for the purpose of levy of License fee.
• PTA/FAB reserves the rights to revoke spectrum trade in the interest to national security, threat to the competition, hazard to public health and safety, non-compliance with the national laws and policies, international obligations and international relations.