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On schedule, the telecoms regulator has concluded the 2021 Pakistan Spectrum Auction for Next-generation Mobile Services. There was 12.8MHz of spectrum on sale in 1800MHz band and another 15MHz of spectrum in 2100MHz band. Participation from all four operators was supposed to raise potentially (at least) $832 million (excluding advance tax). But things did not turn out quite as expected.

Based on the PTA’s announcement on September 10, only Ufone chose to participate in the auction, for 9MHz in the 1800MHz band. This has yielded the treasury $279 million (excluding advance tax), at base price. Half of that sum is to be paid upfront within 15 days and the rest in equal annual installments. For its part, the PTA, despite lackluster participation, went ahead with the auction and honored its regulatory mandate.

As things stand, roughly two-thirds of spectrum is left unsold on the table. The government can always return to the market at an opportune time and offload it. However, the lack of participation by Jazz, Telenor and Zong has left some questions. The operators needed more spectrum to meet their growing data requirements, and it was also clear that they weren’t exactly thrilled about spectrum prices. But why did the trio choose to abstain altogether? It sends a message.

Some of the market’s concerns have come out in the open post-auction. However, the grumblings among leading operators about the base price being too high is not something new, and yet they had chosen to take part in auctions past. Same goes for the dollar-based spectrum pricing, which has been used by the regulator in the past as well. What broke the camel’s back this time around?

It appears that both the operators and the regulator have come to a point where they are unable to resolve core issues in the background. For instance, the way the government handled license-renewal process of Jazz (Warid), Telenor and Zong starting July 2019 had left a bad taste among investors. Jazz and Telenor sued the government, but they still had to pay majority of renewal fees, and now two years later the court has ruled for the government. At least Jazz is appealing to the Supreme Court.

Besides, it has become a difficult operating environment for operators. High user taxes, rising utility prices, price-sensitive subscriber base, and volatile currency, all impact the ROI for foreign sponsors. Pricey spectrum auctions, in this situation, leave little for operators to invest in network rollouts. Having said that, there is no way around investing more in spectrum holdings, in order to monetize data services.

As for the regulator, it was right to demand better quality of service (QoS) from operators going forward, and this is something that the majority of operators seemed unwilling to accept immediately. PTA’s own QoS surveys as well as anecdotal evidence suggests that network quality offered by most operators, especially for phone calls and broadband speed, is getting poor even within well-served areas. Operators cutting corners here and there is not new, but service level has gone noticeably worse.

What now? Ufone is in a better position to upgrade its data network and compete with the rest of the market. Other operators already have decent spectrum holdings, which they will try to further optimize to absorb growing data traffic. That will lead to more QoS issues and affect the foundation of digital ecosystem. Sooner or later, operators will need more spectrum. Fearing NAB, government cannot lower base price. One side will have to blink. Neither of them conceded this time around. Users are to suffer!

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