Thursday, June 6, 2013

3G Auction in Pakistan: Big Challenge For Next Govt in 2013

Much has been written about the auction of the 3G Licence here in Pakistan. We are presenting the live commentary over the issue.

It’s unclear at the moment that which Political Party is going to form the next Government in Pakistan, after the upcoming elections. Whoever forms the next government, auction of the 3G licence seems to be one of the Top challenge for new government in the running year 2013.

The Next Government will have the opportunity to revive the prospects of Pakistan’s now-flagging but once-flagship telecommunication industry. That opportunity presents itself in the form of the introduction of third-generation (3G) telecommunication network technology, which will usher in the much-awaited era of high speed mobile broadband for telecom subscribers in the country.

Since the freed up radio frequency spectrum is still unassigned – about 30MHz in the 1900/2100MHz band for 3G license, and 7.38MHz in the 800MHz band for Instaphone (defunct) license – the next government can hit the ground running and conclude this auction within six months.

That, however, would depend on the level of urgency based on their understanding of what 3G can deliver in terms of industry growth, communication-led productivity gains, and job-creation. No less important would be to stay clear of the controversies and troubles which led to the failure of last government to sell these licenses despite three attempts during last year.

Reasons why this potentially billion-dollar transaction never went through are varied as well as complex. It was the country’s fractious political economy that caught up with the PTA’s maiden efforts back in January 2012. It was surely not a pretty sight when the PTA, which was busy doing road shows and dealing with other pre-auction business, had to take a back seat following the opposition’s characterization of the spectrum auction as “loot sale”.

The oppositions’ concerns over the base price, technology-neutrality and payment terms of the auction coincided with the contempt of court proceedings against the then Prime Minister in February, making the environment infeasible to carry out a big ticket transaction.

Amid fears of this auction landing in courts and the relevant authorities’ fumbling responses to grilling parliamentary hearings over auction transparency, apparently led the government to postpone the auction business for some time while ordering a revision of auction’s modalities.

With a new Prime Minister in charge, who seemed eager to conduct the auction within his government’s term, the second attempt was made in August as the PTA frantically searched for a foreign consultancy firm to advise and assist it in the auction process. The hiring of such a firm, through a bidding process, was supposed to be finalised by mid-October – but this effort, too, led to nowhere.

This time around, PTA seemed short of doing its homework, which led to lackluster participation in the bidding process.

The third sequel to this display of dashing hopes delivered a decisive blow. In November, the authorities’ focus shifted to hiring an “Independent Advisory Group (IAG),” comprising reputed international telecom experts which would conclude the auction in three months. The IAG was formed in late November, despite differences between the then PTA Chairman and Members Finance & Technical over hiring process.

The three independent consultants soon saw their contracts cancelled by PTA over objections from the NAB regarding PPRA rules’ violation. Reportedly, the consultants had done some auction-related work and remained unpaid to date.

The impact of these delays is likely huge, though there is no specific number or metric to measure that. Former PTA Chairman once quoted a daily loss of Rs38 million due to the auction delay (though he didn’t substantiate the figure). The Ministry of IT has stated that the auction could generate over dollar one billion in license fees, attract another dollar one billion in infrastructure development over two years post-auction, and create over 40,000 jobs.

To conclude, recent experience shows that while the next government may want to get things done immediately on the 3G auction front, it cannot compromise on transparency and competitiveness of the process. For that, PTA has to be manned with high caliber professionals who can fulfill the watchdog’s autonomous role as the auction’s sole executor, free from political influence. Otherwise, Pakistan will remain a 3G laggard.

No comments:

Post a Comment