Telecom licences: indecision hurts

Add the telecom sector among the affected lot of government indecisions. It was bad enough that the government dragged its feet on the urgent issue of renewing licenses of three operators. But it’s gotten worse. Out of frustration, the two operators whose licenses are expiring later this month – Jazz (Warid) and Telenor – have taken the government to court over its continued failure to renew their license.

Just a couple of moons ago, the government was reportedly expecting around two billion dollars from telco’s license renewals and an accompanying spectrum auction. That would have been just in time to close FY19 with a manageable fiscal deficit, helped also by a couple of other transactions. (Read BR Research take on this hold-up in the piece, “On telco’s license renewal,” published March 19, 2019).

Alas, playing committee-committee on a matter of business continuity for foreign-origin firms could only play out so long. The licensees had to go legal – in a few weeks, they would have no legal standing to operate in the country; they would have to pare business plans; and their sponsors would have to inform their bourses and shareholders about their Pakistani arm’s doubtful status as a going concern.

In a latest development on this issue, the Islamabad High Court (IHC) has reportedly ordered the telecom authorities to let the operators continue unfettered. In doing so, the court is implicitly agreeing with the telcos’ argument that it’s the government’s fault that the issue had festered for so long. The concerned telcos can find some breathing room now.

This matter going into litigation exposes the government’s hollow strategy of stalling the process and then scoring big on renewal fees just ahead of the deadline. But now with the court involved, the government’s leverage is gone, the matter has become a legal dispute, and the desired billions suddenly look distant.

But the real source of defeat is the government’s indecision to bridge what the telcos offered to pay ($291 million per license, just as in 2004) and what the fiscal hawks wanted telcos to cough up ($450 million per license, pegged with pricing of recent spectrum auctions). How long will this indecision continue to give, affecting the government’s credibility in the eyes of existing and potential investors?

The government can still resolve this matter by offering a renewal price, the bone of contention that is fair and reasonable. A reasonable renewal fee will also generate operators’ interest in another spectrum auction. And for the future, it will be wise to follow more predictability in matters of license renewal and spectrum management, in the interest of reassuring investors.