Cellular phone companies have expressed surprise and resentment over the government shocking announcement for auction of licenses separately for 3G and 4G technology, their exorbitantly higher base prices and full upfront payment along with interest on installments.PTAlookingat3Gtechnologythroughrosetintedglasses_5697
The government’s move for the auction of license for next generation technology have surprised cellular operators because the telecom regulator have kept stating that license should be technology natural allowing operators whether they choose 3G and 4G.
The number of license which have been earlier believed to be four have been increased to five. It means all existing operators–Mobilink, Telenor, Ufone, Zong and Warid– will be pushed for participation in bidding process or the fifth license has introduced to enter new operator into Pakistani market.
The companies are perplexed with new strategy of the government and flexing their muscles to discuss mutually what is best for their interest to set a proposal for win-win situation for them and the government.
3G and 4G Technology To Heat Up Competition
The classification of licenses in terms of technologies is government bid to bring competition among the operators to contest for advanced technology or 4G for attracting maximum customers having high income and consumption of mobile services with tendency of quick adoptability of new technology.
Though the 4G users will have lesser number than 3G technology in future but these subscribers base will continue to wide in the coming future. However the operators will save cost of infrastructure advancement in years to come and it may also pocket license fee for next phase.
But these operators have concerns that a big number of users might not shift to 4G technology directly but will come gradually from 3G technology because the advanced technology means high price of airtime whereas the price of 3G will have lesser price.
On the other hand, the operators who will be left for opting 3G technology will have a big market of users but the retention period will be shorter as compared to 4G.
These operators will have to pay less one time for infrastructure and license fee but they have to pay a big amount in another round to upgrade their network to 4G and likely another fee of new technology.
However all operators will have customers having 2.5 G users which is the current level of technology.
Higher License Base Prices
The operators thought that license base price set for 3G technology at $295 million and 4G at $210 million are exorbitantly higher than expected.
The base prices will theoretically generate $1,304 million without any appreciation in the bidding process.
The calculated base prices of the license will cross the PTA projected target of $1.2 billion however the government intention or better called lust is to generate maximum prices up to $2 billion which it has indicated by Finance Minister Ishaq Dar and trying to pave the ground for it.
The government has invited few operators of different countries to race for license auction to explore their share in the market of 130 million users. Even if they are not interested to commence their operation in Pakistan, they should at least participate in bidding process to push up license fee value for existing players.
Upfront Payment of License
The government announcement to pay 100 percent payment of license soon after auction is disturbing for operators who could not invest on such huge amount on license and infrastructure simultaneously.
Even the three percent interest payment on 50 percent payment of upfront fees will be extremely tough for operators who were already seeking relaxation on modes and schedule of payments.