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3G/4G auction in Pakistan unlikely for another year

A consultant hired by Pakistan’s regulator has deemed that the market will not be ready for another 3G/4G spectrum auction for at least another year.

The Pakistan Telecommunication Authority (PTA) commissioned an investigation into the matter by InterConnect Communications, which submitted a report following meetings with the country’s 5 mobile operators as well as various other stakeholders.

According to local media, the report found that mobile operators are already contending with low margins, which would likely deter them from any further investment in spectrum for at least the next 12 months. Weak economic growth was also listed as a major concern, along with high taxes and poor return on investments.

This year alone, the PTA has twice been requested to hold fresh auctions by the country’s finance ministry, primarily as the government factored PKR56 billion ($539 million) to be generated by the auctions into its budget for the fiscal year 2014-15. It then pushed its target for the fiscal year up to PKR65 billion.

However, both attempts to hold auctions this year were derailed by all 5 of the country’s mobile operators refusing to participate. Minister of State for Telecom and IT Anusha Rehman has stated that the ministry intends to hold further 3G/4G auctions before June 30.

Pakistan last held spectrum auctions in April 2014; at this time, the challenges faced by operators were made evident by the amount of unsold 4G and 850MHz spectrum that remained following the bidding. The government promised to address these issues, but operators now face higher taxes than last year.

In 2015 alone, Pakistan’s federal government more than doubled the amount of sales tax applicable to certain types of handsets manufactured overseas from PKR300-1,000 ($3-$10), while the government of the Punjab pushed through a 19.5% sales tax on internet usage. Adding to operator woes, mobile revenue fell 1.8% in the fiscal year ending June 30, but most strikingly direct foreign investment plummeted by 72% compared to last year.

The allure of a 4G licence is therefore at a low ebb – only China Mobile-backed Zong currently has one, and the recently-announced merger between VimpelCom’s Mobilink and Warid Telecom is likely to have an impact on competitive pricing. Market leader Mobilink has also stated that it won’t take part in any auctions.

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