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The Cabinet wants a change of approach

 


ISLAMABAD:

The government has been urged to abandon the revenue-driven approach in auctioning additional telecommunications spectrum, as this has hampered the increasingly rapid expansion of broadband and digitization in Pakistan.

Several cabinet members and Prime Minister Imran Khan questioned and expressed concern over the failure of relevant officials to lure Pakistan’s major telecommunications companies to the recently staged spectrum auction.

They noted the lukewarm reaction from major telecom operators who refrained from participating in the additional spectrum auction.

A cabinet member observed that the revenue-driven approach to selling telecommunications spectrum needed to be reconsidered as it hampered any resulting benefits to the economy.

The government was only able to recoup $ 279 million from the revenue target of $ 1 billion through the auction of additional spectrum.

At a recent federal cabinet meeting, Prime Minister Khan questioned the lukewarm response from mobile network operators as three of the four telecom companies chose to stay out of the bidding process due to higher base price and strict conditions.

At the spectrum auction, only 9 MHz were sold out of a total of 27.8 MHz available for sale in the 1800 and 2100 bands. Ufone was the only telecommunications company to participate in the process. call for tenders.

The fact that 62% of the company’s shares are owned by the Pakistani government means that the auction failed to attract investment from foreign sponsors of major cellular network operators.

According to mobile operators (CMOs), policymakers have completely ignored their concern about unrealistic and complex license terms.

The inclusion of new obligations in the new licenses would require three times the amount of capital investment relative to the price of spectrum in the first three years.

This capital expenditure would have been paid to foreign sellers, resulting in an outflow of foreign currency and additional initial capital expenditure for the shareholders.

Among the serious concerns expressed by the telecommunications industry was the offer of a spectrum price in dollars instead of rupees, making the potential investment risky given the instability of the rupee-dollar parity.

The requirement to open an escrow account by mobile phone companies and deposit 50% of the disputed amount in the event of a financial disagreement with the Pakistan Telecommunications Authority also deprives CMOs of their constitutional right to legal speech in Pakistan.

Read The ban on digital platforms “hampers” digital growth

Senior telecommunications experts have stressed the need for better connectivity, but lamented that the country is saving on spectrum for nothing.

The question is, the three biggest companies that did not participate in the auction already have billions of dollars in investment, so why would they compromise on the spectrum that is their fuel and the dynamics of the market will require optimized services. There are clearly major flaws in the design of the auctions.

Spectrum has been priced at an exorbitant level, therefore its deployment cannot reach the optimal level. Some tapes remained unsold because the policy favored short-term money over long-term economic contribution through the development of broadband.

Pakistan has only deployed about a third of its potential spectrum while the rest is wasted.

CMOs, on several occasions, have pointed out that Pakistan’s telecommunications sector lacks political and regulatory predictability, which discourages long-term investments and severely affects the government’s goal of universal digitization.

The rigid change in the new license conditions for CMOs without taking into account their comments during consultation sessions with the regulator has dampened operators’ interest in the auction.

However, there is an apparent need to offer more spectrum to achieve the goals of digitization and connectivity.

The telecommunications sector is the most important driver of the Digital Pakistan government initiative and contributes significantly to Pakistan’s GDP. However, the continued one-sided approach of policy makers to the formulation of regulations does not create a win-win situation for telecommunications users.

The whole process needs to be looked at holistically and all stakeholders, including Marketing Directors, need to determine the future of Digital Pakistan.

Posted in The Express Tribune on September 21, 2021.

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