Pay $450mln renewal fee or licences expire on Aug 21, PTA orders Jazz and Telenor

Pakistan’s biggest mobile network Jazz, and the country’s second-largest telecoms firm, Telenor, are challenging in court the license renewal process after government’s last-minute price hike for a long-term mobile operating license renewal. (AFP)
Updated 01 August 2019

Pay $450mln renewal fee or licences expire on Aug 21, PTA orders Jazz and Telenor

  • Pakistan’s biggest and second-largest telecom firms have taken the government to court over the renewal process and price
  • Companies believe licence price hike goes against a 2004 agreement and have challenged the PTA for setting the price in USD

ISLAMABAD/KARACHI: The Pakistan Telecommunication Authority has informed the country's biggest mobile network, Jazz, and second-largest telecoms firm, Telenor, that their licences will stand expired on August 21 if the companies do not agree to pay a renewal fee of $450 million as per the PTA’s terms and conditions, PTA and Jazz officials said this week.
Pakistan’s telecoms market was deregulated in 2004 and foreign firms such as Jazz have invested heavily. But now the company fears the new renewal fee, which it says goes against an agreement struck in 2004, will pose a significant risk to the connectivity of millions of Pakistanis and jeopardize a growing digital economy.
According to PTA figures as of April 2019, Pakistan has 161 million cellular subscribers, with 59.2 million using Jazz and 44.8 million on Telenor.
“The decision by PTA to expire the licences of operators on August 21, 2019, if not renewed on their terms, is indeed concerning,” Ali Naseer, Chief Corporate and Enterprise Officer at Jazz, told Arab News in an interview this week. “This can potentially disrupt services for millions of Pakistani cell phone users.”
A Telenor spokesman did not respond to repeated calls for comment but a PTA directive to Telenor dated July 22 and seen by Arab News orders the company to pay the $450 million renewal fee by the August 21 deadline and on the PTA’s terms, or risk discontinuation of operations.
Mobile technology is the primary means of communication for millions of Pakistanis. Recent intelligence research by the GSM Association, a trade body that represents the interests of mobile network operators worldwide, estimated the total economic impact of mobiles on Pakistan’s economy was $17 billion, or 5.4% of GDP.
In 2017, total direct tax and fee payments by the mobile sector were estimated at $950 million, 29% of operator revenue, and the wider mobile ecosystem contributed a total of $1.9 billion in direct and indirect taxes in 2018, as per the GSM Association. A tax directory issued by the Federal Board of Revenue for tax year 2017 listed Telenor and Jazz among the country's top corporate taxpayers.
Pakistan’s government is currently struggling to lift revenues, cut ballooning public debt and raise foreign reserves. A recently signed loan agreement with the International Monetary Fund is aimed at shoring up fragile public finances and strengthening a slowing economy.
“It’s important that Pakistan doesn’t ... place gaining inflated revenues from spectrum licences above the connectivity of its citizens,” Brett Tarnutzer, Head of Spectrum at GSMA, said. “Spectrum prices and taxes should be set at a sufficiently low level that allows operators to deliver affordable services and deploy mobile broadband widely.”
“NEGLIGENCE AND INCOMPETENCE”
The licences of both Jazz and Telenor were originally set to expire on 25 May. In early May, the two companies took PTA to court after the Authority asked them to pay a $450 million renewal fee, more than double the dollar price at which the operators originally acquired licences at auction in 2004.
At the heart of the court challenge between the telecom firms and the Pakistan government is a 2015 telecommunications policy that replaced a 2004 version and which Jazz and Telenor say outlined the terms and conditions for auctions of new spectrums but did not lay down any guidelines regarding renewals.
Globally, licence renewal terms are to be communicated to operators 18 months before a licence is due to expire. According to PTA documents seen by Arab News, the Authority came up with new terms on May 9, a little over two weeks before the May 25 deadline and after Jazz and Telenor had taken the matter to court.
“That is the first example of negligence or incompetence because now, in 2019, when the renewals were due, we found ourselves in a situation where there is no framework,” Naseer said. “Had they [government] come out with a reasonable policy, we would have accepted that because we want predictability. Jazz is now 25 years in the market, we are one of the largest foreign direct investors in the country, we’re not going anywhere in a hurry. We are beholden to the country and we want to work and progress.”
Jazz also says that it communicated its intention to renew its licence 30 months prior to the May 25 expiry deadline, as specified in the licence terms. PTA was then required to inform the operators about the renewal terms and conditions within three months of receiving their intent for renewal, which the Authority did not. In the absence of a new set of guidelines formulated and communicated within the deadline as set by the law and the licence terms, Jazz and Telenor argued in court that the 2004 licence terms and conditions should continue to apply to the latest renewal.
After several hearings, the Islamabad High Court remanded the case back to PTA last month, asking the Authority to review the terms of renewal with a “fresh eye.” After quasi-judicial hearings for both Jazz and Telenor, PTA concluded on July 22 that the telecom operators would have to pay the set price of $450 million by August 21.
PTA directives to Jazz and Telenor seen by Arab News said payment terms for the $450 million renewal fee would be 100% upfront or 50% upfront with the remaining 50% paid in five equal annual installments on the London Interbank Offered Rate, plus 3%. The payment could be made in USD or its equivalent in Pakistani rupees, calculated at the market exchange rate at the time of payment.
“We are disappointed that PTA has not been able to see our point of view on these renewals,” Naseer said. “We are committed to endeavour towards improved connectivity and an enabling digital environment in Pakistan.”
A PTA spokesman declined repeated requests for an interview and only referred to public documents about the licences.
“EVALUATING ALL OPTIONS”
The decision by Pakistan’s cash-strapped government to set the new renewal fee in US dollars and not in local rupee currency, which has lost about 40 percent against the dollar in the last 20 months, is another major sticking point for the mobile operators.
The 2004 auction for a 15-year licence cost $291 million, equivalent to Rs17 billion at the 2004 exchange rate. But with the rupee plunging to record lows against the dollar, Jazz now faces paying Rs67 billion for $450 million, a 265% increase compared to what Jazz paid in 2004.
Naseer said the company earned and charged customers in local currency, not dollars, and thus setting the renewal fee in dollars was “unsound.”
“We believe in Pakistan and if word gets out that existing investors are being treated like this it makes it very difficult for us to say ‘Pakistan is open for business’,” Naseer said.
Jazz says it is now evaluating the option of renewing its licence at the PTA’s asking price, letting it expire or filing an appeal with the Islamabad High Court before August 22. Telenor’s options are similar.
“Honestly, at this stage we are evaluating all our options,” Naseer said. “Nothing has been ruled out.”


EU safety agency suspends Pakistani airlines’ European authorization

Updated 01 July 2020

EU safety agency suspends Pakistani airlines’ European authorization

  • The step has been taken due to concerns about the country’s ability to ensure compliance with international aviation standards
  • PIA expects the ‘earliest possible’ lifting of suspension after action by the government and the airline

ISLAMABAD: The European Union Air Safety Agency (EASA) has suspended Pakistan International Airlines’ (PIA) authorization to fly to the bloc for six months, the airline said on Tuesday, in a major blow to the country’s flag carrier.
Separately, the safety agency said it took the action due to concerns about the country’s ability to ensure compliance with international aviation standards at all times.
The suspension follows Pakistan’s grounding of 262 of the country’s 860 pilots — including 141 of PIA’s 434 — whose licenses the aviation minister termed “dubious.”
“EASA has temporarily suspended PIA’s authorization to operate to the EU member states for a period of six months effective July 1, 2020 with the right to appeal,” PIA said in a statement. It added it would temporarily discontinue all its flights to Europe.
Confirming the move in an emailed statement, the EASA referred to a recent investigation by Pakistan which it said showed a “large share” of pilot licenses to be invalid.
Pakistan’s grounding of the pilots followed a preliminary report on a PIA crash in Karachi that killed 97 people last month.
PIA said it is in contact with the EASA to take corrective measures and appeal against the decision, adding that it expected the “earliest possible” lifting of the suspension after action by the government and the airline.
The EASA also suspended the authorization of another Pakistani airline, Vision Air International.
Vision Air International did not immediately respond to an emailed request for comment.
Following the EASA’s decision, the UK Civil Aviation Authority said it, too, was withdrawing PIA’s permit to operate from three of its airports, as required under law.
“PIA flights from Birmingham, London Heathrow and Manchester airports are suspended with immediate effect,” a spokesman for the UK authority told Reuters.
The three were major flying destinations for the airline.
Meanwhile, Pakistani pilots and their union, the Pakistan Airlines Pilots Association (PALPA), say there are discrepancies in the government’s list of pilots with licenses deemed dubious and are demanding a judicial investigation.
PIA and private airline Air Blue have also queried the list with PIA saying 36 of its pilots mentioned had either retired or left the airline, while Air Blue said it no longer employed seven of nine pilots on the list.
“It contains names of highly educated and qualified pilots who have passed all the tests,” PALPA’s president, Chaudhry Salman, told Reuters. “We want a fair and impartial resolution to this matter.”
An official at Pakistan’s aviation ministry, Abdul Sattar Khokhar, said they did not have full details of the discrepancies. “The issue is being sorted out in consultation with airlines and civil aviation authorities.”