High spectrum pricing: Govt finds itself in a catch-22 situation

ISLAMABAD: The federal government finds itself in a catch-22 over spectrum pricing, fearing that setting high prices could deter telecom operators, while lowering the prices — as recommended by a US-based international consultant hired for the spectrum auction — could subject it to possible strict scrutiny.

Amid mounting public frustration over deteriorating mobile service quality, the Spectrum Advisory Committee (SAC) meeting on Tuesday remained inconclusive regarding the long-awaited 5G spectrum auction, with the government now targeting the first quarter of 2026 to go under the hammer, sources told Business Recorder.

Sources revealed that caught between caution and criticism, the government is walking a tightrope on spectrum pricing — worried that high reserve prices could scare away telecom bidders, yet equally anxious that lower prices, as suggested by international consultants, may invite scrutiny if the prices were compared to those finalized in the past auctions.

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Chaired by Federal Minister for Finance and Revenue Muhammad Aurangzeb, the committee meeting was attended by Federal Minister for Information Technology and Telecommunication, Chairman of the Pakistan Telecommunication Authority (PTA), and other relevant stakeholders.

Officials briefed the committee on auction readiness, spectrum availability, and market conditions amid mounting public frustration over deteriorating mobile service quality.

Despite surging demand, a significant 600 MHz of spectrum remains idle, even as consumers grapple with dropped calls, slow data speeds, and network congestion. Only 274 MHz of spectrum is currently available to serve around 200 million subscribers, underscoring the strain on existing networks.

National Economic Research Associates Inc. (NERA), a US-based international consultancy firm hired by Pakistan for the 5G spectrum auction, has presented its report to SAC.

The consultant has warned that high spectrum prices will result in fewer players, and levels of competition will decline, potentially leading to lower levels of innovation, high prices, and other poor outcomes for consumers. It is critical to emphasize that, from the perspective of net flows to government revenue, it is highly likely that lower spectrum prices will lead to long-term higher government revenues.

The consultant has also recommended extended payment terms, saying given the substantial investment required in networks and systems, there is a need for extended payment terms (eg, like Vietnam, Indonesia, Bangladesh, etc), additional incentives may be required in relation to the 3.5 GHz band (which is 5G only), even with growth in 5G FWA opportunity.

Pakistan’s low quantum of IMT spectrum assignments, according to NERA are;(i) Auction delay— spectrum auctions have tended to lag,(ii) High base prices; the minimum acceptable price for spectrum have been set too high,(iii) unfavourable commercial terms; in 2014 auction, operators were required to first purchase the less desirable 2100 MHz spectrum to qualify for the more sought-after 1800 MHz spectrum,(iv) unused reserved spectrum; some IMT spectrum was reserved for a new entrant who never entered the market, leaving 30 percent of the offered spectrum unsold,(v) Dollar-pegged prices; IMT spectrum prices are tied to the US dollar, and with the devaluation of the Pakistani rupee, the cost for operates has skyrocketed, since the last auction in 2021, where $1 equivalent Rs163, the exchange rates has risen to Rs278, a 70 per cent increase solely owing to currency devaluation.

The impact of unsold spectrum because of excessive reserve prices in the upcoming auction will be substantial with a two-year delay to the availability of new spectrum is projected to result in a loss of $1.8 billion (Rs500 billion) in GDP over the 2025-30 compared to a baseline scenario in which all bands are sold and this increases to $4.3 billion (Rs1,168 billion) in the case of a five-year delay, said Global System for Mobile Communications Association (GSMA).

Past auctions in Pakistan have often resulted in unsold spectrum, on account of high reserve prices, which contributed to slower 4G rollout and adoption, besides failing to realise additional benefits of some $300 million (Rs80 billion), said GSMA in its latest report.

A briefing to the Deputy Prime Minister is scheduled for Wednesday, to be followed by a briefing to the Prime Minister the next day, as the process enters a decisive phase.

The comparison with regional peers was stark. Bangladesh has allocated about 700 MHz of spectrum for 173 million subscribers, highlighting the scale of the capacity gap and raising questions about policy delays and allocation strategy.

Officials acknowledged that unlocking idle spectrum is critical to improving the quality of service and enabling next-generation networks. The planned 5G auction is expected to be a key inflection point, but stakeholders warned that further delays could deepen service degradation and blunt digital growth.

With top leadership set to be briefed this week, the coming days will be watched closely for signals on timelines, reserve prices, and the release of dormant spectrum—decisions that could determine whether consumers see relief before 2026 or continue to endure subpar connectivity.

Copyright Business Recorder, 2025