3G technology and FDI in the offing
February 17, 2012
Pakistan has delayed to launch 3G technology through cellular operators in the region but now it has decided to rollout the cutting-edge services by 2013 and expedited its efforts to auction license among the investors and foreign telecom companies.
There are expectations that 3G technology will be best suitable as per dynamics and usage of domestic subscribers however 4G, which is a more advanced technology could be launched by the operators with mutual agreement and financial viability of the market.
The auction of the licenses will be carried out next months separately for two categories, one for 800MHz spectrum and other three for 1900/2100 MHz frequency spectrums.
The base price for first category license is set at $155 million for duration of around 8 years, whereas the base price second license would be $ 210 million for duration of 15 years.
Besides four licenses, franchise services will be offered to the operators could not buy new technology license but they can offer the same services to their customers.
Industry people said that the three companies are already working to rollout their network for 3G technology, which will be initially started in 10 major cities but they will finally start their operations in 2013 in accordance to the instructions of Pakistan Telecommunication Authority (PTA).
These companies are eagerly looking for adoption of the new technology in order to retain their subscribers’ market in the future, but there will be entry of new foreign operators possible in the field for starting business in the 6th most populated country of the world.
In this regard, the authority planned to organize mega events for investors and telecom operators in Singapore and Dubai in the upcoming weeks, as arrangements have been done in this regard with proper allocation of money and support of the government.
It will hold in Barcelona on the occasion of Mobile World Congress—the biggest event of telecom sector in the world. Besides, the authority has sought support of country’s diplomatic and trade ties for pursuing global telecom operators investing in Pakistan such as Vodafone, DoCoMo, Orange, AT&T; who have shown interest to bid for the upcoming 3G license auction in Pakistan.
Officials at PTA said that the authority has expedited its efforts to ensure participation of 10-12 number of big telecom operators in the auction in addition to existing players of the local telecom sector, hence the prices of license will be increased.
The government has set a safe target of $850 million revenues from the auction no doubt the bidding will double the value if the process will be carried out successfully.
The auction of the license has become indispensible factor for country’s economy, as its expected generating money will be utilized to bridge widening fiscal deficit. Besides, the launch of the service will land handsome FDI in the country through telecom operators.
More than a billion dollars Foreign Direct Investment (FDI) is likely to land in the second-half of the current financial year if the auction of 3G/4G licenses is successfully carried out on high-realized value.
Experts said that winning prices in the auction may increase more than thrice of the base price depending on the interest of the bidding investors or telecom operators. In 2004, the bidding was organized in two different stages. In the first stage, the bidders placed sealed bids in a box against the base price of $61 million. The highest value of $161 million was received after participation of five operators and finally the value of $291 million was set as license fee in the second stage of the bidding process.
If the value of $61 million was driven to $291 million in the past, the base price of $210 million should be multiplied three to four times, they added.
Besides, billions of dollars FDI and local investment may land in the country by next year in telecom sector, as license holders start rolling out infrastructure of the 3G/4G services.
The winner of 800 MHz license can start in current year whereas the three operators will launch their services in 2013, the PTA’s IM stated.
According to information memorandum, the license for 800 MHz license shall be issued after payment of first 50 percent of the initial spectrum fee within 30 working days from the auction date. The remaining 50 percent of the license price shall be deposited in five equal annual installments payable in dollars or equivalent in rupees.
The license fee will be determined equally for three spectrum of 1900/2100 MHz, that is, the highest will be paid by winning bidders. The license shall be awarded after payment of 100 percent of the auction winning price within sixty 60 working days from the date it is offered to the bidder. Therefore handsome inflows of FDI are likely by next two months of the auction in May 2012 and huge payment will be transferred to the government’s kitty.
According to an estimate, a telecom company needs one billion dollars alone for the launch of 3G services in the country, whereas there will be a number of direct and indirect employments in the engineering and telecom sectors generated besides different allied businesses.