3G spectrum auction: stakes are high

There is something for everyone in the upcoming mobile spectrum auction. The ailing government may get the longed-for fiscal injection; the wailing operators may gradually break out of the bleeding competitive regime; the awaiting customers may finally experience the high-speed mobile broadband for social and commercial networking; and the economy may benefit when the total factor productivity grows. As per ITU statistics, over 150 countries across several continents have commercially launched the 3G services so far. After taking their sweet time, Pakistani authorities seem committed this fiscal to see this auction through while the iron is getting hotter. The existing mobile network operators are gearing up to fight it out, and reportedly, some major foreign operators are interested in the said auction, too. That the government will hit a home run is anything but certain. Grilling parliamentary hearings, coupled with the authorities own fumbling pre-auction performance, have raised question marks whether the auction can be conducted on the scheduled date of March 29. Apparently to assuage the inquisitive legislators, the government has asked the PTA and the MoIT to hammer out the auctions modalities afresh, in a way that the auction is completed within the specified time frame. Towards that end, reportedly, efforts are afoot to find a workaround vis-à-vis the hiring of an international consultant to oversee the process. It is still unclear how the authorities intend to proceed. Neither is there any official word on change in timeline of events like pre-bid conference (March 2), submission of EOIs (March 9) and pre-auction qualification (March 12). Amid all this, a recent development shows how important this auction is for the MNOs. The NA standing committee had reportedly demanded PTA to debar Ufone from participating in this auction as Etisalat, Ufones parent company, still owes $800 million to the government from the 2006 sale of PTCLs 26 percent management stake in a deal worth $2.6 billion. The Khaleej Times reported yesterday that now the issue could be settled very soon. The online newspaper quoted Dr. Mirza Ikhtiar Baig, advisor to PM and chairman of Pak-UAE Business Council, as saying that after deduction of the market price of the disputed properties belonging to PTCL, the remaining amount will be disbursed to Pakistan "within weeks". It remains to be seen which operators thrive and which don even survive in the post-3G milieu. However, experts are certain that the remaining 2G operators would eventually lose their high-end customers to the 3G operators whose high-speed data services would make the formers low-speed EDGE/ GPRS services a major turn off for these customers. More like the Pareto principle (or the 80/20 rule) is the scenario in the Pakistani mobile telephony sector where a very small portion of customers, five to ten percent, provides a large chunk of revenues to the operators. To protect their post-paid and high-end prepaid customers, the MNOs may bid aggressively. "Losing such high-end customers would mean letting go of at least half of their gross revenues. MNOs need to protect these revenue streams and grow at the same time following the 3G auction. With foreign firms bidding, it wouldn be a surprise if the peak price per license reaches half a billion dollar", noted a telecom professional. With such kind of a scenario shaping up, it is imperative that the transparency, fairness and timeliness are ensured throughout the process.