ISLAMABAD - A delusional marketing strategy and questionable handling of the 3G, 4G auction process by Minister of State for Information Technology Anusha Rehman has cost the government heavily as it could not sell all the offered spectrum of six slots and at least two slots remained unsold, including one in 4G spectrums.
Taking into consideration the base price, two unsold slots cost the government more than US$ 400 million, but due to the fact that the government could not create competitive environment to have maximum gains from the auction, the overall loss can be calculated as more than US$ 800 million.
The government had offered six blocks for the next generation mobile spectrum auction. As per details, there were three slots for 3G services of 10 MHz each in 2100 MHz band, two slots for 4G services of 10 MHz each in 1800 MHz band and one slot for 2G services of 7.38 MHz in 850 MHz band. The last one was reserved for the new entrant only.
The base price set in the IM was US$ 291 million for each slot of 10 MHz in 2100 band, US$ 210 million for each slot of 10 MHz band in 1800 MHz band and US$ 210 million for one slot of 7.38 MHz in 850 MHz band. In total, the base price for all 6 slots was US$ 1,503 million and considering there would be a great competition the government was expecting a capital gain of US$ 2 billion from this auction.
The Nation has come to know about a different situation through its sources. “We are receiving information from different quarters that 4 companies have submitted bids for 3G spectrum in 2100 MHz band, but for 4G spectrum in 1800 MHz band only Zong has submitted its bid that leaves one slot in the 4G spectrum unsold,” sources in the telecom sector told The Nation. The slot that was reserved for the new entrant only also remains unsold as no new entrant took interest in the auction, they further said.
The sources also revealed quoting their contacts in mobile companies that two companies, Mobilink and Zong, had submitted their bids for 10 MHz in 2100 MHz band of 3G and the other two companies, Ufone and Telenor, had offered bids only for 5 MHz in the same band. To compete for 4G, it was made mandatory in IM that the company would have to buy at least 10 MHz in 2100 MHz band.
The Ministry of IT and the Ministry of Finance were unrealistically optimistic that there would be new entrants taking part in the auction. This optimism in fact influenced the information memorandum prepared by the consultant hired by the Pakistan Telecom Authority.
In the information memorandum, it was made mandatory for all the companies to bid for 3G services if they were interested in buying spectrum in 4G band. The sources said the aforementioned condition made it difficult for the companies to buy spectrum in 3G and 4G bands simultaneously.
The mobile operators already doing business in the market showed their reservations many a time on this condition and told the government that they were not in a position to buy spectrum in both the bands and it would be financially unviable for them to spend huge money just on the licences. But the government did not listen to them as it was very optimistic that new entrants would join the auction, forcing the local players to raise their bids to survive in the market.
The government was actually playing on the card of “Turkcell” and believed it would definitely come into bid. The sources said the government’s expectations from Turkcell were unrealistic as the company did not send any of its senior officials during the whole process and that showed their disinterest in the auction and the government should have understood it well.
“That time the government turned deaf ears to the repeated calls of the telecom operators to lift the 3G versus 4G condition and not to play on new entrants. The same card has been used against it and now it is unable to sell whole available spectrum and is at the mercy of local players,” the sources said.
A PTA spokesperson denied that the process was a failure. He also refuted the rumours that there was no bidder for the 4G spectrum.
The spokesperson claimed the response received from four existing cellular mobile operators of Pakistan was very encouraging and satisfactory for the PTA. He further said it was entirely wrong to say that no cellular mobile operator had shown interest in 4G (1800 MHz).
The spokesperson said, “Demand is higher than the supply, so auction will happen. Moreover, it was a matter of commonsense that if there is less or even same demand from bidders/operators, there is no reason to go for the auction on April 23, 2014, and bidders can have the spectrum straightaway.”
According to Reuters, Warid Telecom Pakistan, owned by the privately-held conglomerate Abu Dhabi Group, did not submit a bid. Neither did Turkcell and Saudi Telecom Company, two foreign companies who had earlier shown interest.