Cabinet Approved Policy for Renewal of Cellular Mobile Licenses

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Cabinet Approved Policy for Renewal of Cellular Mobile Licenses

The federal cabinet has approved the policy for renewal of cellular mobile licenses for 15 years, on Tuesday. The government estimates to generate a revenue of $1.37 billion through the process.

The government has approved to renew licenses of two operators (Jazz and Telenor) at $449.2 million each while the third operator (Zong) would have to pay $470 million.

Special Assistant to Prime Minister on Information and Broadcasting Dr. Firdous Ashiq Awan, while addressing a press conference, said that Prime Minister Imran Khan presided over the cabinet meeting, on Tuesday, where the matter pertaining to mobile license renewal was discussed.

She said the government has approved the renewal policy and expects a revenue of $1.37 billion from this process.

She further said that the government is likely to unveil a new telecom policy soon to attract investment and provide a conducive environment to investors besides building their confidence.

Background :

For those who don’t know, cellular licenses of Telenor and Jazz are expiring on May 25th, 2019, while cellular license of Zong is expiring in October 2019.

PTA, for the purpose, had hired a consultant firm to set terms and price of the license renewals. However, due to the change of Chairman PTA, the government and objections from FAB, the consultants never started their work.

Later on, it was decided that an inter-ministerial committee would decide the terms and price of licenses based on recommendations made by PTA.

PM Khan constituted a five-member committee to review PTA’s recommendations.

The committee comprised of Minister for Information Technology and Telecommunication Dr Khalid Maqbool Siddiqui, Advisor to Prime Minister on Finance Hafeez Sheikh, State Minister for Revenue Hammad Azhar, Advisor to Prime Minister Abdul Razzak Dawood and Federal Minister for Privatization Mian Mohammad Soomro to review the PTA report.

Fair Price? 

Cellular licenses were issued by PTA to two new cellular mobile operators i.e. Telenor Pakistan and Warid Telecom on May 26, 2004 for a period of 15 years, under the Mobile Cellular Policy, 2004, and on payment of $291 million after an auction.

The cellular license of Zong was also renewed by PTA under the 2004 Policy on October 23, 2004 for a period of 15 years on payment of $291 million. These licenses are now due for renewal on May 25, 2019 and October 22, 2019 respectively.

It may be recalled that the government of Pakistan renewed the license of the state-owned entity, Ufone, at $291 million through an interest-free payment on installments.

After today’s approval, however, it appears that the government has significantly increased the price.

Telenor Group had recommended that the license of Telenor Pakistan and other operators be renewed under the same terms and conditions.

M/s Veon, one of the largest foreign investors in Pakistan has sought a predictable and transparent investment climate and a licence renewal price of not more than $291 million.

Possible Litigation :

The proper way of setting the price of license renewals is through recommendations from a third party consultant. The operators are not going to be happy about the price that has been announced.

Jazz and Telenor are already in court, primarily for the protection of their licenses but the petition also covers the price that they must pay to renew licenses.

It is clear that this multi-billion dollar transaction won’t be a smooth sail for the operators or the PTA.