Pakistan’s 3G license fiasco

During the early 2000’s, Pakistan’s communication and information technology sector witnessed miraculous transformation. The sector was opened up for foreign investment and saw the entry of major global telecom operators. Telecom boom in the country paid rich economic dividends, but the industry’s magical run has ended in recent times. With profits margins becoming thinner and the operating landscape becoming increasingly competitive, the industry is set to enter a consolidation phase.
Despite strong performance in the initial years, Pakistan is ranked 127th among 155 countries in the global ICT Development Index report. The telecom sector has recently found itself out of favor as past governments have not made significant efforts to modernize the infrastructure and reap positive economic rewards from its development. For telecom operators, the auction process of 3G licenses has been a particularly frustrating experience. The sale of 3G licenses has already faced a delay of more than two years due to red tapism and poor prioritization on part of the subsequent governments. At least four major telecom operators have signaled their intentions to participate in the bidding process of third and fourth generation telecom licenses in Pakistan. The license auction is expected to provide a much-needed boost to Pakistan’s flagging economy. The launch of the much anticipated 3G broadband services for mobile users has the potential to increase economic of the country by 1.1 percent of the GDP, while also creating an additional 2.4 percent employment opportunities. Various studies have shown a direct correlation between improved connectivity and GDP growth rate. The auction of 3G licenses is expected to raise around $1 billion in licensing fee, while also inject an additional billion dollars in the economy through infrastructure development. By focusing on high-speed broadband access and development of the information technology sector, Pakistan has the ability to dramatically turnaround its sick economy.
Although the Supreme Court has recently given a two-month deadline for the auction, the Sharif-led government is yet to give a green signal to the 3G auction process. Three attempts by the previous administration to auction 3G broadband were blocked because of concerns about transparency of the process. As Pakistan already boasts high mobile usage penetration rates, the government must make a swift decision with regards to the auction of 3G licenses as it offers significant financial benefits and an opportunity to trigger social change in the country. The new high-speed services are likely to provide a tremendous boost to the rural economy and encourage its participation in the mainstream sector. However, the timeline for auction of 3G licenses will largely depend on the policy of the new government.
To ensure the success of 3G services, the government must maintain a balance between the initial auction fee and the ability of operators to make further investments in the network layout. Operators are likely to struggle with expansion of 3G services if the upfront spectrum fee is set at a very high level. Most importantly, the government must ensure credibility of the bidding process by not compromising on the transparency and competitiveness of the deals.