Pakistan can learn something
from Bangladeshs 3G auction
Just a few days back Bangladesh auctioned mobile spectrum for third-generation (3G) network technology. No, this piece will not go into lamenting about Pakistan falling behind its regional peers, even
war-torn countries like Afghanistan,
on this count. Instead, this event in
the east offers some food for thought
to local telecom authorities, who haven
yet made it to the party, but are
supposedly on their way.
Unlike India, Bangladesh seems to
have resisted the urge to squeeze the
lemon dry at the auction stage, for
which they are inviting praise. Out of
the 40MHz spectrum put on sale,
reportedly, 25MHz was sold for $525
million to 4 existing mobile network
operators (MNOs). In simple terms, the
auction yielded a sales price of $21
million per MHz, a meagre increase
over a base price of $20 million per
MHz of spectrum.
High upfront costs can tie down
industry growth. India may have
scored $15 billion from its 3G auction
back in May 2010, but its post-3G
industry growth has remained stifled.
Analysts maintain that Indian MNOs
overpaid for the spectrum, which hurt
their investments in 3G rollout.
Perhaps thats why the CEO of Bharti
Airtel - a multinational telecom giant
headquartered in New Delhi, which
also acquired a 5MHz block in
Bangladesh auction - publicly stated
two days ago that "India can follow
Bangladesh model on spectrum
pricing."
Over at home, Pakistans government
has already budgeted $1.2 billion from
the oft-delayed 3G auction in FY14,
which means that per MHz base price
could be as high as $40 million per
MHz if spectrum on sales remains at
30MHz. It must be noted that in
Pakistans last such telecom auctions
(2G spectrum; between 2004 and 2005,
MNOs paid a price of about $21.4
million per MHz.
This see-saw between government
fixation on auction price and operator
focus on roll-out investment is
familiar. Back in 2012, when it seemed
that 3G auction was about to take
place, a high-ranking telecom
professional told BR Research that
"Any pricing should make sure that
objectives are met for all the parties.
Investor has to get the return on
investment; government has to earn
revenue; and customer has to be able
to get the benefit from technology. All
three things have to converge at a
particular price point."
Former CEO of the Universal Service
Fund, Parvez Iftikhar - who also
advised the previous government on
3G auction - told BR Research that
there was zero competition in
Bangladesh auction out of five
operators; one could not raise enough
money to participate. In Pakistans
case, where at least 5 bidders will
fight for 3 blocks, "it will result in
more competition, higher price and no
unsold spectrum."
Bangladesh will further allocate
10MHz to its state-run operator and
the rest will be kept for future
industry needs. Parvez feels that this
spectrum remained unsold because the
market probably considered base price
a bit high. "Therefore, our
governments focus should be on faster
and wider coverage, not on short-term
gain of high price. I hope our roll-out
obligations will be aggressive."
Pakistans telecom policymakers have
previously favoured new, international
operators to bid for 3G spectrum, to
drive up competition. But Bangladesh
failed to attract new operator.
"One reason is that the existing MNOs
have such great advantage that a
newcomer would find it very difficult.
Second reason could be that since 3G
has been around for a long time now,
big players have collected a lot of 3G
licenses in several parts of the world.
So their appetite for going into a new
developing country is rather low.
Therefore, I do not expect a new player
in Pakistan either," he noted.
Clearly, Bangladeshs experience
manifests operators changing value
proposition towards 3G. Pakistans
policymakers would do well to learn
from what transpired there last week.
http://www.brecorder.com/br-researc...-from-bangladeshs-3g-auction/?date=2013-09-12