STAFF REPORT ISB: The government of Pakistan is going to auction the 3G/4G spectrum on April 23 as Prime Minister Nawaz Sharif has recently approved the final draft of Information Memorandum, a key document necessary for this auction, which has witnessed repeated delay during the last couple of years.

The document, also released by the Pakistan Telecommunication Authority (PTA), suggests interested operators can submit their applications and sealed bids for participation along with pre-bid deposits by April 14.

There are three 3G (in 2100 MHz) and two 4G (in 1800 MHz) licenses to be auctioned through two-stage bidding.

According to the policy directives, the base prices are set as (i) $295 million for 10MHz paired spectrum in 1.9/2.1GHz frequency band (ii) $210 million for 10MHz paired spectrum in 1800 MHz frequency band (iii) $291 million for 7.38MHz paired spectrum in 850MHz frequency band. The inclusion of 1800MHz band was exclusively done to catalyse the deployment of 4G in Pakistan. Spectrum in 850MHz will give incentive for new entrants in Pakistan and will certainly foster competition.

Minister of State for ITandT Anusha Rehman has recently told the media that the Information Memorandum was finalized after extensive meetings with the stakeholders.

Payment options are set as full payment or minimum 50 per cent upfront and the remaining can be paid in 5 equal installments in 5 years with interest rate at LIBOR plus 3 per cent. “The payment rules are made strict and in case of delay in payment and non-payment for a long time, the government reserves the right to even cancel the contract apart from imposing penalties,” she said. No such condition was part of the contracts earlier made with the companies, she added.

In the Finance Ministrys statement, Finance Minister Mohammad Ishaq Dar was quoted as saying that the auction process should be transparent and competitive.

Pakistan has five main mobile network operators, but they could face international competition when it comes to securing mobile broadband licenses. The chances of new international telecom operators in the auction for 3G/4G spectrum are going high after Turk Cell, Saudi Telecom Company (STC) have reportedly visited Pakistan last week to study the business case and to assess the market condition.

The sources said that a two-member delegation of STC met Chairman PTA Syed Ismail Shah where queries about market, broadband services and opportunities for new entrants were made.

The Chairman PTA briefed the delegation about the revised Information Memorandum (IM) for 3G/4G auction.

The sources said that the delegation also met State Minister for ITandT Anusha Rehman and other high-ups and would file a report to their Board of Directors. A delegation of Turkish mobile phone operator Turk Cell also visited the country last week to study its business case regarding the spectrum auction.

About the mode of payment of license price, the minister said on the insistence of mobile operators that they might not be able to pay in dollars, the government has relaxed that clause and now they can pay in rupees as well. She also mentioned that performance is also one of the conditions that the winners will have to submit before standing eligible for the license.

She told that already present operators had requested to insert a clause that the government will not hold any more spectrum auction in next five years but that was denied but the government agreed on 18 months time period. But the condition does not impose on the blocks presented for auction this time and if any block remains unsold, the government reserves the right to auction it any time soon after.

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