Published on April 25th, 2019 | by Abdullah Sulehri0
The Dilemma of The Telecom Operator’s License Renewal
Pakistan is going through a difficult economic phase. The value of Pakistani rupee has materially declined in the past few months owing to the negative balance of payment, inefficient tax collection and insufficient foreign direct investment (FDI).
Telecommunication is an oligopoly industry in Pakistan. The telecommunication companies bring substantial FDI to Pakistan and are responsible for massive job creation hence form a crucial part of our economy.
The government has unfortunately been neglecting telecommunication sector for some time despite their emphasis on “Digital Pakistan” to which this industry’s role is pivotal. The primary dilemma faced the telecommunication sector right now is the renewal of their license without which mobile operator would not be able to operate in the country.
In accordance with Pakistan Telecommunication Authority (PTA) regulations, the government was supposed to issue a license renewal framework more than one year ago. However, three mobile operators i.e. Zong, Warid, and Telenor are still waiting for the license renewal framework to be announced. The licenses of two mobile operators will be expiring in May 2019 i.e. next month.
The problem here is that somehow the government has not made any announcement indicating applicable license renewal fees. A request has also been done by the operators that the government shouldn’t exceed the amount of USD 291 Million, which was the amount charged back in 2004. It seems that operators are worried that the government will charge greater fee owing to devaluation of Pakistani rupee.
Telecom Policy – 2015 on License Renewal
Clause 8.11 of Telecommunications Policy 2015 reproduced below states that:
8.11.1 “Renewal of license and associated spectrum at the end of a license period will be as per the policy of the Government. PTA will in timely manner initiate the process in accordance with terms and conditions of the license”
8.11.2 “In case the renewal of licenses, PTA will make recommendations to Federal Government (MoIT) within the timelines stipulated in the respective licenses”
8.11.3 “Other spectrum not subject to license renewal terms will be priced in accordance with the applicable spectrum pricing methods specified in Section 8.7”
8.11.4 “Where spectrum payments for microwave and mobile spectrum have been introduced subsequent to the initial assignment of mobile spectrum, the spectrum fees associated with the mobile spectrum will be determined under the terms of the applicable license. Any microwave spectrum will then be charged using the AIP method in place.”
Problems Faced by The Mobile Operators
The operators sell their services in Pakistan, hence have revenues in PKR. They are concerned that a high fee denominated in USD can substantially decrease their profit margins. The mobile operators also need incremental spectrums in order to cater the growing customer base which is expected to grow manifold in the coming years.
“The world’s most valuable resource is no longer oil, but data,” said an official of a cellular company.”
“Developed nations make the spectrum readily available for future technological needs. Japan, for example, offers free spectrum to telecom operators while the UK gives perpetual licenses to telecom companies at extremely low prices,” said the official.
The service quality of these customers can be affected if they are unable to acquire additional bandwidth due to a possible high fee. The government will also not benefit from the unused spectrums which sum up to around 60% of the total spectrum. It will be redundant for the government if not acquired by mobile operators as no economic benefits can be generated by the government with the unused spectrum.
According to a market expert:
“Spectrum is like the way in the air, if the way is not used a day, the advantage is missed for the day. It is an asset only if it is utilized effectively – the unutilized spectrum is of no value to the government or to the economy.”
To enhance the investor confidence the telecommunication companies expect a fair, just and transparent process for license fee determination. PTA should take all stake holders in confidence and take a judicious decision without any further delay.