Cabinet Approves Proposal for Telcos License Renewal

The federal cabinet has approved the policy for renewal of cellular Mobile licenses for 15 years on Tuesday. The government estimates to generate a revenue of $1.37 billion through the process.

The government has approved to renew licenses of two operators (Jazz and Telenor) at $449. 2 million each while the third operator (Zong) would have to pay $470 million.

Special Assistant to Prime Minister on Information and Broadcasting Dr. Firdous Ashiq Awan, while addressing a press conference, said that Prime Minister Imran Khan presided over the cabinet meeting on Tuesday where the matter pertaining to mobile license renewal was discussed.

She said the government has approved the renewal policy and expects a revenue of $1.37 billion from this process.

She further said that the government is likely to unveil a new telecom policy soon to attract investment and provide a conducive environment to investors besides building their confidence.

Background

For those who don’t know, cellular licenses of Telenor and Jazz are expiring on May 25th, 2019, while cellular license of Zong is expiring in October 2019.

PTA, for the purpose, had hired a consultant firm to set terms and price of the license renewals. However, due to the change of Chairman PTA, the government and objections from FAB, the consultants never started their work.

Later on, it was decided that an inter-ministerial committee would decide the terms and price of licenses based on recommendations made by PTA.

PM Khan constituted a five-member committee to review PTA’s recommendations.

The committee comprised of Minister for Information Technology and Telecommunication Dr Khalid Maqbool Siddiqui, Advisor to Prime Minister on Finance Hafeez Sheikh, State Minister for Revenue Hammad Azhar, Advisor to Prime Minister Abdul Razzak Dawood and Federal Minister for Privatization Mian Mohammad Soomro to review the PTA report.

Fair Price? 

Cellular licenses were issued by PTA to two new cellular mobile operators i.e. Telenor Pakistan and Warid Telecom on May 26, 2004 for a period of 15 years, under the Mobile Cellular Policy, 2004, and on payment of $291 million after an auction.

The cellular license of Zong was also renewed by PTA under the 2004 Policy on October 23, 2004 for a period of 15 years on payment of $291 million.

These licenses are now due for renewal on May 25, 2019 and October 22, 2019 respectively.

It may be recalled that the government of Pakistan renewed the license of the state-owned entity, Ufone, at $291 million through an interest-free payment on installments.

After today’s approval, however, it appears that the government has significantly increased the price.

Telenor Group had recommended that the license of Telenor Pakistan and other operators be renewed under the same terms and conditions.

M/s Veon, one of the largest foreign investors in Pakistan has sought a predictable and transparent investment climate and a licence renewal price of not more than $291 million.

Possible Litigation

The proper way of setting the price of license renewals is through recommendations from a third party consultant. The operators are not going to be happy about the price that has been announced today.

Jazz and Telenor are already in court, primarily for the protection of their licenses but the petition also covers the price that they must pay to renew licenses.

It is clear that this multi-billion dollar transaction won’t be a smooth sail for the operators or the PTA.

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


    • No it’s just the extortionate renewal price. See second paragraph:

      >The government has approved to renew licenses of two operators (for Jazz and Telenor) at $449. 2 million each while the third operator (Zong) would have to pay $470 million.

  • Government is not honouring the contracts it signed with the telcos. Those contracts specified the renewal price at $291 million. By moving the goal posts on them it is showing the world that investing in Pakistan is a dangerous idea. Once you put your money here and are invested heavily the government will try to extort as much money as it can from you. It did this with Karachi Electric as well. It has prevented Abraaj Capital from selling its stake to Shanghai Electric.

    • Bhai comment karne se pehle article parh liya karo. Ufone ka license 2004 ka renew ho chuka hai.

  • So Ufone ka $ 291 mein renew kiya license in 2014 aur woh bhe interest-free installments par. Kyun kai it is state owned? Ye kaun sa tareeqa hai?

  • There should open auction after every 20 years, if existing wins the bid renew his license else license should be awarded to new winner.

    • Bhai you have no idea how telecom business works. What if all existing companies loose bid? What will happened to their customers? Their network across the country? Will new companies buy those customers and networks from old companies? What if they start from scratch? Villages will get mobile signals again after 5 years.

  • Mobile companies have made windfall profits from the tax saga played last year, where they were literally tax free for 10 months! They made some USD 700m plus in gross revenue from the tax holiday. (propakistani calc of Rs. 100 b in 10 months)
    It wouldn’t harm if part of it goes to pay for an incremental license fee that was price tagged at $291 in 2014, some 15 years ago.

    • Telecoms especially Telenor make billions in profit each year. They also have a habit of stealing your credit for bogus data and service charges that never were used by the customer. I was in Kashmir for 10 months recently and randomly was getting sim data charges when phone was connected to WiFi. I found out from friends and relatives they too experienced the same. Complaining to them didn’t always result in a refund either.

    • Multiply $291 million to PKR rate of 2004 and now multiply $291 million to PKR rate of 2019. Converting to PKR price has already becomes more than double. And Telecos are making money in PKR not US $. Every story has two versions. You have your own, Telcos have their own. But frankly speaking this price is insane and no one is going to renew it at this price. Even at the cost of 2G customers.

      • It will be more than twice ofcourse, as USD was Rs. 54 and now it is Rs. 140.

        But also note changes that justify the raised prices. Since the last license 15 years ago,
        – total population of Pak has increased by 50 million
        – target coverage which was 1/20th of the current level is now 100% covered
        – telecom industry had mere 5 million subscribers, and now it has over 140+ million revenue generating customers

  • What if Telecos refuse to renew these 2G licenses? And ask all 2G customers to get 3G or 4G mobile to continue using their services? I am sure at least Jazz and Zong can survive without it

    • In any case, they are offering the same services and no innovation for decades now. Unlike the world, which is full of so many innovations (WiFis, Smart TV services, and decent ecosystem in and around telecom).
      Same story in every industry in Pakistan. The country afterall has seen the same model of Mehran for 30 years now!

      • It’s our own fault. We have seen same model of mehran becausenwe didn’t even had an auto policy untill few years ago. Why people will invest in Pakistan when there is not even a policy for industry. Same goes for Mobiles. We still do not have a mobile manufacturing policy but we have imposed heavy taxes on import.
        And you are talking about innovation in Telecom. Have you forgot that we were last in the region to auction MBB services? And our ARPU of mobile companies is lowest in the region. Even lower than bangladesh. Have you checked 4G data plans of bangladesh? Pay those rates and talk about innovation. Where there is innovation, prices are most likely to be high. And here we are weeping on mobile recharge taxes.

        • and one may ask, who is responsible for the lower prices? if the focus is on scale, rather than quality, the price definitely becomes the easiest weapon to use

          • It depends upon market. Ask any one if he want 10 mbps 4G spees with these prices or 100 mbps on 3 times the current price. You will get the answer.
            Moreover lack of fiber infrastructure and heavy taxes on import of equipments are also the culprits.

            • I wish I was telecom expert rather than an economist, but the heavy taxes generally make the prices go up, as the cost is higher.

              It is typical in hyper competitive industries that in a state of war, the players tend to forget that their objective is to create shareholder value in $ terms rather than get into price wars. They end up building scale but at the cost of losing shareholder value.

  • teleco companies earn much bigger that they can pay this cost easily and don’t forget this will be the cost for next 15 years which is long haul.
    but i’m sure that if govt succeed to take these charges from companies surely they will double the price for use of each of thier service as well as they will degrade thier service quality. If you notice the worst service of every network specially jazz and telenor after extra charges was removed by SCP.


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