News Desk |
The fate of the country’s largest mobile operators – Jazz and Telenor – hangs in balance as the government has delayed license renewal for so long that the licenses of the two companies are set to expire on May 24 without any renewal after they hit their 15-year life.
Because of the uncertainty, both the companies approached the Islamabad High Court (IHC) asking for “clarity” on the terms of the license renewal that it says should be done “in an equitable, fair and transparent way.” While granting a stay, the IHC barred the Pakistan Telecommunication Authority (PTA) to not take any action against the companies and directed PTA to submit a detailed reply by May 14.
With only weeks to go before the expiration of the license, the mobile phone companies petitioned IHC against PTA over delay in the license renewal policy by the government. In the face of expiry, the companies sought IHC’s help as the continuity of their business is in jeopardy.
Sehgal states that VimpelCom (VEON) group owns Jazz which is requiring the renewal of the Jazz licence in Pakistan that is due later this month.
Since the process of renewal has taken so long – roughly over two years – the companies have requested the court that the “government should be stopped from taking any adverse action that limits the ability of the operators to carry on their business”.
Dispute over Renewal of License
The companies have asked the government to renew the license at the same dollar price $291 million at which the license was acquired back in 2004. However, after a delay of several months, the federal government has approved the renewal policy of two telecom operators at $450 million each for 15 years. Meanwhile, the third operator Zong, whose license is due to expire in October 2019 – would have to pay $470 million to renew its telecom license.
The court order prompted the government to proceed with the renewal request in the cabinet meeting on May 7 wherein it was decided that the license should be renewed at $450 million in the light of the spectrum auctions held in recent years. However, both the companies have maintained that as per the telecom policy and relevant clauses in the license itself the first renewal should take place at the same price that the license was originally acquired at – $291 million.
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The issue of renewal of licenses of the telecom giants has been in process for a long time because the government was continuously delaying the approval until the high court granted stay in the case with directions to PTA to submit a detailed reply.
Experts’ Opinion on the Issue
Ikram Sehgal, a renowned defence and security analyst, stated in his op-ed in Daily Times that the request that (PTA) should have started the renewal process long time ago is justified but the demand that they want the price for the renewal of their license fixed at the amount at which the license was acquired “is certainly not justified.”
Sehgal states that VimpelCom (VEON) group owns Jazz which is requiring the renewal of the Jazz licence in Pakistan that is due later this month. He says the licence had been issued for Rs16.8 billion ($ 291 million) in 2004 and is now worth Rs41.4 billion ($ 291 million).
For now, he said, if the stay order remains in place, both companies will be allowed to continue operations beyond the expiration of the licence while they negotiate the price with the government.
He has argued that the cost of the spectrum must go up substantially since the last license 15 years ago and (1) total population of Pak has increased by 50 million (2) target coverage which was 1/20th of country and it is now 100% covered (3) telecom industry had mere 5 million subscribers, and now it has over 140+ million customers (4) Spectrum prices are generally higher when the economies are in high sovereign debt and limited access to financial markets.
High proceeds from spectrum assignments increase public funds to help ease short-term public sector fiscal pressures (5) Spectrum assignments are often seen as a simpler way to raise additional revenues than introducing or raising taxes (6) Given that spectrum prices are unlikely to determine government debt, the more plausible interpretation is that governments in developing countries experiencing financial challenges are using spectrum assignments to increase public sector revenues.
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On the other hand, Khurram Husain opined in Dawn that both companies have found themselves in a position where they could face an expiration of their licence without any renewal, meaning the continuity of their business would be in jeopardy, which in turn would necessitate instructions to their parent companies that might be forced to issue notices to their shareholders in international stock markets that their Pakistan operations faced a risk to business continuity.
He stated that such a notice would have severe adverse consequences for the share price of the parent companies, thereby sending a message to global markets that Pakistan is a risky place to invest in since the government has a difficult time discharging its obligations towards investors.
For now, he said, if the stay order remains in place, both companies will be allowed to continue operations beyond the expiration of the licence while they negotiate the price with the government.
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He has concluded that if the court vacates the stay then the companies would be at a disadvantage but if the court entertains companies’ plea that the government “is not interpreting its own policies in a legal manner” then that would be a more optimistic scenario for the companies.