Global developments cast shadows on 3G technology in Pakistan

ISLAMABAD: With D-Day of March 29 approaching nearer for issuance of 3G license, the ambiguity in Information Memorandum and complications arising due to common ownership at Parents Group of Telecom companies have made it a fit case for Competition Commission of Pakistan to investigate the matter thoroughly.

In the backdrop of 3G conundrum, a recent development at Vimpel.Com, the global cellular giant that runs its Telecom companies around the world, has made local scenario topsy-turvy. As per details Telenor Group last week bought 234,000,000 Vimpel.Com preferred shares. The move is aimed at giving boost to its voting rights from 25.01 percent to 36.36 percent. The shift will also give unbridled stakes to Telenor in Pakistan’s Mobilink as the latter is a subsidiary of Vimpel.com.

The complex but interesting number game suggests Vimpel.Com holds 51.7 percent rights of Mobilink whereas Telenor Group holds 31.66 % economic rights and 36.36 percent voting rights in Vimpel.Com. It means by default Telenor Group holds 31.66 percent out of 51.7 percent economic rights of Mobilink. The scenario looks set to heavily favour Telenor as 5 out of 11 directors in Vimpel.Com come from Telenor Group.

PTA plans to auction three 3G licenses through auction to country’s five Telecom operators. This would translate to the grim reality that the two operators who would fail to bid enough for the 3G spectrum would start losing their customers to those who would be offering services based on 3G technologies.

Analysts fear with Mobilink already relegated to the status of sister concern at Parents Group, Telenor may opt to buy two 3G licenses as it is permissible under the current laws issued by PTA in Information Memorandum, thus leaving the remaining three operators jockeying for the possession of sole license available in the market.

To make the matters worse a PTA advertisement appeared in Urdu and English languages newspapers for “Invitation for Expression of Interest” (EOI) for License/Spectrum auction consultancy services.

Observers believe the publication of the ad shows lack of capacity on behalf of PTA as it seems unable of carrying forward the Auction process all by itself and needs third party services. The third party hiring would also purge itself of any possible scam as a result of Auction process.

Although Clause 7.8.1 of PTA’s IM for cellular license auction says that all bidders must disclose their ownership information and no two bidders shall have any common directorship on their respective boards, it doesn’t address the explosive question of having common directors at holding level.

However, the better sense seemed to prevail in PTA as it is reportedly in the process of looking into issue of having common director at holdings. A final decision is likely to be made after consulting industry stakeholders to ensure that monopoly is avoided in any case.

Analysts who have keenly studied the IM have pinned their hopes on clause 11.1 and 11.2 of Information Memorandum which gives PTA right to take any action, including amendment in IM, in order to ensure the Auction process is carried out in a fair and transparent manner. The said clause further equips PTA with the right to modify or terminate the Auction process at any time in its sole discretion.

Industry analysts say both PTA and CCP will have to look into the situation emerging out of developments at Vimpel.Com and ensure level playing fields to all the Telecom operators who have invested billions of dollars in this sector and provided direct and indirect jobs to tens of thousands of people despite gloomy economic and law& order scenario in the country.

When this scribe tried to contact Spokesman PTA Muhammad Younus, for comments his cell phone remained switched off despite repeated calls.

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