Government has Telenor’s back?

ISLAMABAD: Telenor Pakistan is set to benefit from the recent announcement of the Spectrum Auction Advisory Committee (SAAC) to auction the 2100 MHz band. As per the official press release available on the Ministry of Information’s website, “The committee unanimously decided to go for auction of 2100 MHz band in 5, 5 MHz bandwidth for 10 years using the current consultant’s report at net present value.”

Last month, the 15-member SAAC was constituted by the Federal cabinet to oversee the spectrum auction process. The inaugural meeting was headed by the Finance Minister, Miftah Ismail, and included the Information Technology and Telecom Minister, Economic Affairs Minister, Commerce Minister, Power Minister, Coordinator to the PM on Commerce and Industry, and the PTA chairman amongst other members.

The auction pricing and structure will likely be advantageous for the Norwegian Telecom operator. As per sources, the other three major operators in the country, Jazz, Zong & Ufone, operate the 1800MHz band as the core for 4G services, unlike Telenor, which uses 2100 MHz. 

PTCL’s Group president and chief executive, Hatem Bamatraf, in a board meeting last month, stated that Ufone wouldn’t be participating in the upcoming spectrum auction. However, he added that the terms of the new auction should remain the same to avoid partiality towards a specific operator. While Jazz and Zong already have a 20 MHz spectrum in the 2100 bandwidth, Ufone and Telenor have 10 MHz each. 

The announcement comes after the meeting of the Norwegian ambassador with the Telecom Minister earlier this week.

What is Spectrum?

In simple terms, spectrum is radio waves that are present all around us, being used by multiple electronic devices, including phones, WiFi devices, and telecom signal transmitters.

The spectrum is divided into frequencies to avoid interference by other devices. If the signals could be broadcasted at any frequency level, there would be a lot of disruption in communication.

Spectrum for the Telcom operators starts from 800 MHz and can go up to 2300 MHz.

As per an article in NDTV by Gopal Sathe, a Senior Tech journalist, “Lower frequencies will use less power, travel further, get less affected by disturbances, and provide better coverage inside buildings. This means you ideally want to operate at the lowest frequency that can carry signals necessary for the applications you are running (voice/ data/ anything else). 1800MHz seems to be the sweet spot between coverage and capacity as far as 4G deployment is concerned.”

Announcement for Auction

Earlier this week, SAAC approved the auction 10 MHz of 2100 band in two blocks of 5MHz for 10 years. However, the earlier auctions in which Jazz, Ufone, and Zong participated saw bandwidth sold for 15 years. Why does it matter? The spectrum is priced based on the number of years. The last price finalised for the 2100 band was around $29 million per 1 MHz for 15 years. The same per year price is being used but for a lesser number of years which takes the total price to around $19.5 million for 1 MHz for 10 years. 

Interestingly, Telenor had already communicated their willingness to buy the 2100 band spectrum to PTA, but for a 7 year period. It was unlikely that the spectrum would have been offered for a lesser number of years than before, but, as per sources, the government’s willingness to keep Telenor in the Pakistani market alongside the Norwegian ambassador’s recent meeting with the Minister of IT and Telecommunication played its role in bringing down the spectrum price. 

Norwegian ambassador’s meeting with the Telecom minister. Source: APP

However, this move has irked the other operators, undermining their ability to compete in the market. Chairman PTA also raised this point in the SAAC meeting. A senior official in the telecom sector, on the condition of anonymity, told Profit, “It is unfair to other operators that an auction at a reduced price is being held when it is known that the government has already sold the spectrum at a higher price to other operators and effectively no one except Telenor will bid in the upcoming auction.”

Earlier this week, Aamir Ibrahim, the CEO of Jazz, in a meeting of Prime Minister’s I.T. and Digital Economy Advisory Council’s Subcommittee on Telecommunications, suggested increasing the number of annual installments for spectrum license payments from 5 to 10.

While one operator getting preferential license terms might not go down well with other CMOs, this won’t be the first time. Last year, Telenor won the same 2100Mhz band spectrum for AJK and GB, auctioning at the base price as no other operator auctioned for it.

Yet, there are some positives to take away from this development. Firstly, a sale of auction would bring in $218 million of FDI if the offered band is fully subscribed. Further, an interest from the Telenor to buy additional spectrum might be indicative of the global telco giant’s decision to keep operating in the Pakistani market for the time being.