ISLAMABAD: The government decided on Friday to auction next month six fresh cellular telecommunication licences, five of them in the next generation technology, for 15 years. The auction is estimated to yield a minimum of $1.6 billion “The prime minister has approved the final recommendations on auction process of third and fourth generation of telecom licences under which the bidding will be held by the end of March,” Finance Minister Ishaq Dar said at a news conference.

The recommendations were finalised by a supervisory committee headed by Mr Dar on the basis of work done by international consultants — Value Partner Management Consulting Limited — and consultations with cellular telecom operators, big telecom players in Saudi Arabia, Qatar, Turkey and other countries and telecom experts and analysts.

The government will offer three licences for the third generation telecom licences (10 megahertz licences in the 2100MHz spectrum band), two for fourth generation (10MHz pared spectrum in 1800 MHz band) and a 7.38 MHz licence of 850 MHz spectrum belonging to defunct Instaphone to allow a new entrant in the market.

The minister said the government had also set a base price to start bidding for each licence. Companies intending to compete for the third generation licences would have to start with a bid of $295 million for each licence while the starting point for the fourth generation licence category will be $210 million.

The base price for old licence of 7.38 MHz was fixed at $291 million to enable a new operator to enter the country’s telecom market and then move into the third and fourth generation telecom category by paying an additional licence fee to be fixed on the basis of bidding results. Some new companies have shown interest in the country’s telecom market. An existing operator will have to bid for third generation licence and then add on the bid price of fourth generation licences, he said.

Accordingly, the minimum bid for the six licences would be $1.596 which could go up to any level in competitive bid, the minister said, adding that he would not comment on the expected revenue although he would like the bids to go as high as possible.

Responding to a question, he said he had set a revenue target of $1.2 billion through telecom spectrum auction in the federal budget in June last year that would be realised by middle of April.

Under the policy directive for the auction, payments under the final bid would have to be made either upfront in full or a minimum of 50 per cent advance and the remaining 50 per cent in five equal instalments in five years with an interest rate of London InterBank Offered Rate (LIBOR) plus 3 per cent.

Responding to a question, Mr Dar said existing operators had wanted the licence period for 20 years and payment of licence fee in 15 years as was the case with the previous GSM licences (Global System for Mobile Telecom) auction in 2004. This was turned down because the government did not see any benefit in that.

He said the government had decided to auction all the six licences together on the basis of a report of the consultants which argued that it would not be possible to hold another auction in six months and hence it might delay the bidding for 4th generation licences for another three to four years as had happened previously.He said the previous government had been trying to auction the new licences for more than three years but failed to deliver while the PML-N government took it as one of the priorities and set the procedure in motion soon after coming into power by completing the structure of Pakistan Telecommunication Authority (PTA) and appointing international consultants.

The finance minister said he expected good results because in a recent survey the Japan External Trade Organisation (JETRO) had declared Pakistan as the second most favoured destination for investments while the US Wall Street Journal had described Pakistan as the most attractive place for private investment despite difficult security situation.

The entire auction process along with upfront payment would be completed by the middle of April that would provide rapid availability of high-end and new generation information and telecommunication technologies in the country that would promote connectivity, efficiency and massive reduction in the cost of doing business.