3G and now 4G services in Pakistan have been a long time coming. Pakistan Telecommunications Authority (PTA) announced that the auction for licenses would be held on April 23rd, and existing licensed companies will be allowed to place their bids.
Outcry auction vs electronic auction
In Bangladesh, the government held a bidding process for auctioning off 3G using the outcry method, where companies shout out their bids. PTA chose not to go this route and instead have opted for an online auction, where the process is set to be anonymous and an alternative set of IDs will be provided to companies to place their bids with. Back when India auctioned off 3G licenses, it also used the electronic method.
Aiming for a more transparent auction
The Tribune quoted one official saying that “the electronic auction will discourage collusion and ensure transparency.” In hopes of discouraging collusion between firms and ensuring a cleaner process, the PTA has made arrangements to hold the electronic bid on their website. According to a report by moremag, “PTA is even going to cancel the bid/license of the operator who is found to be culprit of collusive bidding.”
Preparations in the lead-up to the auction
The details of the bidding process, outlined in the same article, are that companies will have to turn in their bids by April 14th, and then a “mock auction will be held on 21st April to accustom the potential bidders about the process of auction.” In addition to these, the PTA also held an information session on March 27th, explaining the process to potential bidders. During this time, the PTA also confirmed that there would be no further auctions for up to eighteen months, though any leftover licenses will be auctioned at the PTA’s discretion.
The bid winner is expected to extend their services to five cities within nine months, and then branch out to ten more cities within eighteen months. The cities receiving 3G services are supposed to be equally distributed among all the provinces, ensuring a country-wide dispersion of this service.
Generation of $1.6 billion
The PTA is offering three 3G licenses and two 4G licenses. They are counting on competition for the licenses to increase the price of bids and thus generate more revenue for them. The auction is expected to generate approximately $1.6 billion for the government. The auction will be held on PTA’s website, which “will update information after every round of the bidding process.”
Steep Terms
The PTA has set a base amount of $295 million and has stated that they will not accept any bids below this price. They published the terms of the process in an Information Memorandum (IM) that has been met with some resistance. Telecom operators have found the base price to be too high and though they asked for reductions, the government is not budging from the price it has set.
According to Ricardo Tavares, the process is going to “create fierce competition and hike up prices in this band, but it could also lead operators not to engage in the auctions,” adding that there are “additional financial burdens in the draft license that also act to discourage bidders.” This sort of sentiment has been explained before by Muneer Farooqui, CEO of Warid Pakistan, who said that “at the end of the day, everything will boil down to the price tag the regulator puts on the license for this venture. The license fee alone could make or break this project.”
An additional problem is that the high price of acquiring a 3G license means that consumers will have to pay more for getting this service. Telecom companies are working out their tariff plans ahead of the auction. According to a report by The News, telecom companies are expecting “It will be expensive service at the initial stage but with growing competition the tariff will come down over the medium term.”
Talking about their own plans to revamp their system to provide 3G and 4G services, Lars Christian, CEO of Telenor Pakistan stated: “They are having issues with 3G, but when the ball starts rolling, I think it’s going to roll fast. I believe Pakistan will catch up with the rest of the world. They have a huge base of very talented software developers and a strong IT environment. When you combine this with wireless technology and all the new features that they devise, I think that Pakistan can benefit a lot.”
