Auction for 3G/4G hangs in balance

The auction for next generation network spectrum (3G/4G) hangs in the balance, as InterConnect Communication, the consultant hired for the auction has reportedly painted a gloomy picture of market readiness, it is learnt Official sources at the Pakistan Telecommunication Authority (PTA) told Business Recorder that the consultant has completed the market assessment after holding a series of meetings with various stakeholders, including telecom operators in the country. After extensive exercise, the consultant has drafted a report and submitted to the Evaluation Committee of PTA.
The body will go through the report, evaluate and will take a final decision for going or not going for 3G/4G spectrum auction. Sources revealed that the consultant has assessed the market potential for spectrum auction, existing market players, their problems, revenues, investment and auction objectives related to telecom sector growth and revenue. The summary of this report indicates that five telecom players are already operating in the market with low margins and huge competition.
Moreover, operators'''' intent for investing in the spectrum is lacking and any auction in near future could not bring any notable participation from local operators. Telecom operators, during their meetings with the consultants, had expressed concerns over high taxation, low investment return; high costs including energy crisis and the law and order situation in the country.
They further informed the consultant about their commitment of major investment in the NGMS auction held in April 2014. During the last auction process in April 2014, the government assured the operators that major challenges faced by the industry would be addressed on a priority basis. However, the promises made during the auction process remain unfulfilled till date.
During this period, the issues faced by the industry increased manifold. It has been allegedly pointed out that heavy taxations have badly affected the prospects of upcoming 3G/4G auction. Access to broadband services in the country was three percent before the launch of 3G/4G services, which is now around 15 percent. According to an international study, a country could reap internet fruits of its contribution in its economy once the access to services cross the mark of 20 percent.
However after the federal government, provincial governments also imposed heavy taxes on telecom sector especially on broadband services, which is at the initial phase of its survival. The government approved a new telecommunication policy last month with the objective to improve the sector''''s efficiency and service delivery but refused to give the status of industry, which it desperately needs to get relief from heavy taxes.
The situation became further worse for the government after the Mobilink-Warid decision of a merger. If the merger gets approved, Mobilink will not need to participate in the upcoming 4G license while Zong is already carrying both 3G/4G licenses. The government budgeted Rs 56 billion for 2014-15 and showed it as realised in the revised estimates for 3G/4G auction that never took place. For 2015-16, the revenue from 3G/4G auction has been inexplicably raised to Rs 65 billion.
The Finance Ministry is allegedly stressing the Ministry of Information Technology and PTA to expedite efforts for early auction of the remaining spectrum. However, background interviews with different telecom operators revealed that market is not ready for the auction due to heavy investment after the early 3G/4G auction, SIMs verification through biometric system and heavy taxation on mobile internet and data services.