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.”


Economic reforms creating real estate opportunities in Pakistan, says property tycoon

Updated 39 min 30 sec ago

Economic reforms creating real estate opportunities in Pakistan, says property tycoon

  • The two-day Pakistan Property Show in Dubai has attracted significant numbers of expat Pakistanis
  • The event has displayed several affordable property options

DUBAI: Pakistan’s economic reforms and tax implementation scheme have benefitted genuine buyers and developed their trust in the country’s real estate market, a senior property expert told Arab News on Friday.
Zeeshan Ali Khan, CEO of Zameen.com, said that despite the global economic downturn in the property business, there was still an opportunity for buyers in Pakistan.
Khan was speaking to Arab News on the sidelines of the two-day Pakistan Property Show (PPS) that kicked off at the Dubai World Trade Center on December 6.
He said that while bulk buying was not happening, buyers in the Gulf states were still interested in the property market of his country.

Exhibitors from across Pakistan at the Pakistan Property Show at Dubai World Trade Centre on Dec 6, 2019. (AN Photo by Asma Ali Zain)

The event in Dubai has offered overseas Pakistanis a chance to explore rewarding investment opportunities available in some of the most reliable and promising real estate projects.
In addition, since the exhibition features projects from several major cities of Pakistan, it provides visitors with a great opportunity to explore affordable property options.
Khan said that taking the property exhibition to an international level was a tough undertaking in the beginning, though he added that the PPS had gradually acquired its own brand recognition.
“The success story of this event is a source of pride for Pakistanis living in the Gulf,” he said.
“Increasing investment opportunities in the property sector is vital for setting the sector on track to progress, and the main objective of organizing such events is to circulate money in the investment sector, which, in turn, will benefit the overall economy of Pakistan,” he continued.
“The World Trade Center holds its own exclusive status in terms of trade and investment activities in the region where only the best corporates and business entities can stage their activities, and for a Pakistan-based company to organize such a grand event there is definitely a matter of national pride,” Khan noted.
He also highlighted the fact that most of the online traffic Zameen.com received was from Pakistani expatriates residing in the Gulf countries.

Exhibitors from across Pakistan particpating in the Pakistan Property Show at Dubai World Trade Centre on Dec 6, 2019. (AN Photo by Asma Ali Zain)

“The event thus offers great opportunities to Pakistanis living here to make solid, safe and rewarding investments in reliable real estate developments.”
Marwan Ahmed bin Ghalita, CEO of Real Estate Regulatory Agency, Dubai, inaugurated the event.
“I have seen a lot of [Pakistani] companies offering unique projects, sharing data and knowledge from Pakistan to Dubai and Dubai to Pakistan,” he said while interacting with various exhibitors and senior management of Zameen.com.
“Today there are no borders for investment and real estate is the biggest investment that everybody is looking for,” he added.
The PPS 2019 featured the biggest names from Pakistan’s most urban centers, such as Karachi, Lahore, Islamabad, Multan, Peshawar, Murree, Faisalabad, Gujranwala, Raheem Yar Khan, Gwadar, Bahawalpur and DG Khan.
In the last two editions of the event, the property extravaganza attracted a combined audience of over 31,000. Prominent names among this year’s exhibitors included “Eighteen” and “Capital Smart City.”
The show is organized by Zameen.com and this is the company’s third consecutive annual property exhibition event in Dubai.
Zameen.com has so far held a total of 17 major property exhibitions in different countries, attracting over a million visitors.