The Ministry of Information Technology and Telecommunication has issued a policy directive to the Pakistan Telecommunication Authority (PTA) for holding an auction of the Next Generation Mobile Services (NGMS) spectrum in Pakistan.
According to the details, $831.8 million is the minimum estimated revenue based on the base price, but it could go up in case of a successful auction. The spectrum auction will also result in the improvement of mobile broadband services in the country.
The policy directive issued by the ministry stated, “reference Federal Cabinet Decision vide Case No 686/24/2021, dated 27-07-2021 in respect of ECC meeting held on 16-07-202l, the subject Policy Directive No. 1-2/2020-DT dated 4th August 2021 is enclosed for necessary implementation by Pakistan Telecommunication Authority”.
The spectrum auctions for NGMS in Pakistan had been conducted in 2014, 2016, and 2017 under the Policy Directives issued by the Federal Government of Pakistan. Subsequently, the demand for data services had grown exponentially, and the broadband subscribers in the country increased from a mere 14 million in 2014 to over 100 million in April 2021 over seven years.
There has been a particularly significant surge in the demand for broadband services during the COVID-19 pandemic. This ever-increasing reliance on wireless mobile broadband services has necessitated the demand for the availability of more spectrum, and hence, to meet the connectivity needs of the citizens of Pakistan.
After considering the recommendation of the Auction Advisory Committee (constituted by the Federal Government vide 1-2/2020-DT dated 1 October 2020, amended on 24 March 2021); based on the inputs from the Consultant, the PTA, and the FAB; Federal Government in the exercise of the powers conferred under Section 8(2) of the Pakistan Telecommunication (Re-organization) Act, 1996 (amended in 2006) hereby issues the following policy directive for auctioning the available radio frequency spectrum in 1800 MHz and 2100 MHz bands for compliance by the PTA:
- A transparent, competitive process shall be formulated by the PTA for auctioning 12.8 MHz paired spectrum in the 1800 MHz band and 15 MHz paired spectrum in the 2100 MHz;
- The PTA shall issue an Information Memorandum specifying therein the detailed procedure of the auction, including the eligibility criteria and steps for participation in the auction process. The auction shall accordingly be conducted by the PTA in the minimum possible time after the issuance of a policy directive by the federal government;
- The spectrum assignment shall be ‘Technology Neutral’ and usable for all the existing and upcoming advanced generations/technologies within the applicable policy framework of the Government of Pakistan;
- To ensure the optimal utilization of the radio frequency spectrum, the PTA shall endeavor to provide each CMO with the opportunity to acquire such an additional spectrum that will enable it to hold, in total, the spectrum in multiples of standard 5MHz paired spectrum blocks;
- Post spectrum auction, all the CMOs shall be required, within a reasonable time as determined by the PTA, to comply with the rationalization plan as may be issued by the PTA in consultation with the FAB to ensure the optimal utilization of contiguous spectrum holdings in the 1800MHz band;
- The base price for the 2×1 MHz (1 MHz paired) spectrum in 1800 MHz is USD 31 million, while the base price for 2×1 MHz (1 MHz paired) spectrum in 2100 MHz is USD 29 million;
- The existing CMOS and New Entrants are eligible to participate in this auction subject to a spectrum cap of 40 percent in complete 1800 MHz band;
- Transactions related to Spectrum Auction (spectrum fee and related markup) shall be US Dollar-denominated. However, the amount shall be paid either in US Dollars or in equivalent Pakistani Rupees.
For the purpose of conversion, the National Bank of Pakistan TT selling rate prevailing on the date preceding the date of payment shall be used. The payment terms shall be as under:
- Full upfront payment (100 percent); or
- Minimum 50 percent upfront payment, while the remaining to be paid in five equal installments in five years, with a cumulative mark-up rate of one year LIBOR + three percent;
- Moreover, if the winner of the auction intends to pay the remaining balance liability on account of the initial spectrum fee at any time before the end of five years, it would be acceptable and without any pre-payment penalties. However, the mark-up at the rate LIBOR + three percent shall be payable on the balance amount until the date the final payment is made.
A new license shall be issued to the successful bidder for the auctioned spectrum. The tenure of the frequency assignment shall be 15 years. The provisions for Spectrum Trading/Sharing as per the approved regulatory framework shall be incorporated in the new licenses, and the terms and conditions related to improved Coverage and Quality of Service (QoS) etc., shall be incorporated by the PTA in order to enhance mobile broadband proliferation in the country.