3G auction: tread with caution!
The upcoming mobile spectrum and cellular license auctions have assumed huge significance for Pakistan whose FDI inflows are on a secular decline since peaking out in FY08. The telecommunications sector mobilised nearly one-third of FDI inflows to the country in the last seven years; and now expectations are brewing that the two auctions can amass over a billion dollar in license fees. Signs are emerging that some foreign companies might participate in the bidding which will drive the competition higher. "Major telecom operators - including Vodafone, DoComo and Qatar Telecom - are interested in bidding for these licenses," Chairman Board of Investment told BR Research last week. The pre-auction process is moving ahead, albeit with a change in schedule as the submission date for EOIs has been extended by three weeks to March 30. Recently, two events have come to the spotlight that demands the active attention of the policymakers overseeing this auction. First, the multiple attacks on mobile franchise offices in recent months have, reportedly, compelled the Pakistani mobile network operators to voice their concerns to the concerned authorities to protect them from such fatal incidents which have a clear pattern. This scenario is a bane to foreign investment in the countrys flagship sector, especially when it is at the cusp of a game-changing development. Secondly, it has been reported in local press last week that the Senates Standing Committee on IT raised serious concerns over the base price and technology-neutrality of the auction and directed the PTA to amend the 3G Policy. The calculation of base price and the rationale for technology-neutral auction were earlier discussed in this space, which might have helped the readers understand why the Committees concerns are unwarranted. Beyond this, the Senate body has some legal limitations, too. The Parliamentary Standing Committees are, essentially, oversight committees, whose concerns are handled by the line ministries. In this particular case, PTA is just the executor of a policy: a policy which was formulated by the Federal Government. The 3G Policy has been derived from the mandate given in the Telecom Act and the resulting Telecom Policy (2003-04). Had the law required it, the 3G Policy would have been brought in the parliament for debate and approval (which can be done if the Telecom Act is amended for it). These two events cannot be ignored altogether. "The government wants to sell the frequency spectrum and raise money, but what it is actually selling is how outsiders view the business environment in Pakistan. Apart from country risk, now there is an institutional risk at play, too, which depends on factors like the strength of institutions, stability and law-and-order", noted a high-ranking telecom professional. The government has to be proactive in maintaining transparency in the pre- and post-auction process, and address legitimate concerns. For instance, the 3G Policy (which sources say is yet to be taken up by the Federal Cabinet) must be approved at the earliest. "This auction is certainly a high-value development in such business climate. Any delay in the process means that the country loses out," warned an industry veteran. It remains to be seen how the policymakers and the executor tread on from here.