Govt Expects Rs. 27 Billion Non-Tax Revenue From 3G/4G Licenses

The government has budgeted Rs. 27 billion from 3G/4G licenses under the head of non-tax revenue for the next fiscal year 2020-21 compared to Rs. 52.73 billion budgeted for the current fiscal year which was later revised to Rs. 125 billion, but the license renewal matter will be decided in a court.

According to the budget documents 2020-21, under the head of income from property and enterprise (Pakistan Telecommunication Authority (Surplus), the government has projected to generate Rs. 2 billion in the upcoming fiscal year against the budgeted Rs. 1 billion for the outgoing fiscal year which was later revised to Rs. 6 billion for 2019-20.

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

The cellular license of M/s Paktel Limited, now China Mobile Pakistan (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 were due for renewal on May 25, 2019, and October 22, 2019, respectively. In 2014, the government of Pakistan renewed the license of Ufone at $291 million.

Mobile licenses of Telenor and Jazz expired on May 26, 2019. PTA had passed a verdict relating to license renewal of Jazz and Telenor which said:

• Fee for renewal of the license will be $39.5 million per MHz for frequency spectrum of 900 MHz and $29.5 million per MHz for frequency spectrum of 1800 MHz
• Licenses will be renewed with effect from 26th May 2019 for a period of further fifteen (15) years, on a technology-neutral basis, subject to the payment of renewal fee to be calculated in accordance with per MHz price as mentioned above, the payment terms for the renewal fee shall be 100 percent upfront or 50 percent upfront with the remaining 50 percent in five (5) equal annual installments on LIBOR plus 3 percent, the payment can be made in US dollar or in equivalent Pak rupees calculated at the market exchange rate at the time of payment, the upfront payment, as given above, will be paid on or before 21-08-2019.

In case of non-payment of an upfront fee, the license will stand expired, the terms and conditions relating to enhanced quality of service and coverage of network will be finalized in line with applicable regulatory practice and 2015 Policy after consultation with the licensee on or before 21-08-2019, in case, the licensee opts for non-renewal of its license, it will pay a fee on pro-rata basis of the renewal fee along with all other applicable fee and other charges of the license commencing from 26-05-2019 till the date of withdrawal/vacation of the radio frequency spectrum.

However, mobile operators have approached the Islamabad High Court (IHC) with respect to the renewal of mobile licenses.

On August 21, IHC directed Telenor and Jazz for depositing 50 percent of license renewal fee i.e. around Rs. 36 billion each in two weeks as guarantee till the final decision on the appeal of both cellular operators. The matter is still pending in the court and on the direction of IHC; mobile operators have deposited 50 percent of the renewal fee which were due last year.

The government had approved the renewal of licenses of two mobile operators i.e. Jazz and Telenor Pakistan at $450 million each while the third operator – CM Pak at $470 million.

Three mobile operators have deposited around Rs. 107 billion in Federal Consolidated Fund (FCF) for license renewal including $238.6 million (Rs. 37.16 billion) by China Mobile (CM Pak), $224.6 million (Rs. 35.262 billion) by Telenor Pakistan and Jazz each.