The much anticipated auction for 3G and 4G licenses in Pakistan, which was estimated to boost foreign reserves by at least an additional $2 billion, will realistically bring in a dismal $850 million in comparison. By the time bidding closed at 4pm on Monday, the facts were very different to estimations coming in from the IT Ministry, and Finance Minister Ishaq Dar was so utterly in shock, that he threatened to call the auction off entirely. Only 4 out of 5 mobile companies submitted bids for 3G licenses (Warid held back), and not a single bidder showed any interest in 4G licenses.
So how come, in a country where 132 million out of 180 million people use mobile phones, have the 3G and 4G bids fallen so flat? Why was Anusha Rahman so far off the mark with her $2 billion figure?
To begin with, it is a case of overselling the facts; creating hype to inflate optimism and prices. Since February, the Government has been talking up the amounts it could raise, going as far as saying an additional $8 billion may be coming the economy’s way. While it is possible that this is only a case of the IT Ministry trying hard to please the bosses, one solid theory points at collusion; the two different tiers of 3G licenses offered by the Government may very well have presented an opportunity for the companies to collude and not bid against one another. Here, the dynamics of the projected “top bidders” should have been looked into. Each of the mobile companies deal with different kinds of customers; some more price sensitive than others. So whereas Mobilink went for the better 3G spectrum, Ufone didn’t touch it because it deals with non-premium customers. As to why Warid didn’t participate at all, it’s been up for sale for the last couple of years. Pakistan has one of the most price competitive telecom markets in the world, and the market’s economics would have discouraged additional international bidders from participating. Lastly, with regard to the case of the non-existent 4G bids; phones that allow for 4G are far too expensive for a majority of the 132 million cell phone users in Pakistan and the network just isn’t worth the cost for the telecom companies.
And so, as with most confounding things that happen in Pakistan, there is no great mystery awaiting exposure. The only real mystery is why somebody in the IT Ministry didn’t go near their homework.