Telecom Sector Outlook and Spectrum Trading: the Case of Pakistan Shahbaz Nasir Pakistan Telecommunication Authority ITU Workshop on Economic Aspects of Spectrum Management 21 st 23 rd November 2016 Tehran - IRAN
Outline Pakistan: an overview Pakistan s Telecom Market National Spectrum Management Structure Telecommunication Policy 2015 Spectrum Trading Framework Under Consultation 2
Pakistan : An Overview Pakistan Pakistan has the 6 th largest population in the world, making it an attractive market for global investors Gross Domestic Product (GDP): USD 285 billion GDP Growth in 2016: 4.7% (expected to cross 5.7% in 2017) Population, mil 195 (6 th Largest Population) Land Area 796,095 km 2 36 th Largest Area Key Stats Income /Capita US $1560 Literacy Rate 60% Median Age 21.2 Geo-strategic Location Population is young and becoming more educated Urbanization trend is expected to continue, reaching a level of 45% by 2030 3
Telecom Market in Pakistan Cellular Mobile Network Operators Fixed Local Loop Operators Wireless Local Loop Operators Long- Distance and Intl Operators Value Added Service Providers 5 17 12 16 533 All the five MNOs are providing mobile financial services 4
Telecom Market Size Telecom Revenues Data Revenues of Cellular Mobile Operators 5
Competitive Market Cellular Mobile Market Share 6
Telecom Services in Pakistan are the most affordable in the World: consumers get benefited from competition According to World Economic Forum Report (Network Readiness Index), Pakistan is ranked No. 1 in affordability index. Rs. per minute 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Cellular Voice Revenues (Price) per Minute 1.68 1.38 0.93 0.77 0.60 2010-11 2011-12 2012-13 2013-14 2014-15 Cellular voice revenues per minute (Price per voice minute) have been calculated from the overall outgoing cellular minutes and cellular voice revenues. This approximately shows the average effective tariffs of voice calls per minute in the cellular mobile market of Pakistan. 7
THE M-BANKING MARKET IN PAKISTAN Amount transacted through m-banking accounts Rs millions 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 (As of month end) 8,827 6,668 2,639 1,055 400 13,734 350 278.4 300 In millions (during Jan to Dec) 250 191.9 200 150 120.9 100 59 50 375 0 Dec 12 Dec 13 Dec 14 Dec 15 Jun 16 2011 2012 2013 2014 2015 Growth 105% 59% 45% 35% Rs billions 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 (during Jan to Dec) 1,872 1,353 802 492 2011 2012 2013 2014 2015 Growth 135% 63% 69% 38% Source: State Bank of Pakistan 8
PROLIFERATION OF MOBILE BROADBAND IN PAKISTAN : ENABLING GROWTH IN DIGITIZATION OF SERVICES INCLUDING MAGRICULTURE, M-COMMERCE) PTA conducted successful spectrum awards in 2014 and 2016 Auction for spectrum of Next Generation Mobile Services (3G in 2100 MH and 4G in 1800 MHz) held on 23rd April, 2014 Award of additional 40 MHz spectrum to Mobilink (10 MHz),Telenor(5MHz), Zong (10 MHz for 3G and 10 MHz for 4G) and Ufone (5 MHz) for 3G/4G services 2016 Extra-ordinary response to 3G/4G services Broadband subscribers (In millions) 2014 40 37.0 35 30 25 16.9 20 11.4 15 10 5 Telenor has started 4G services 3.8 0 Jun 14 Award of 10 MHz in 850 MHz for 3G/4G services to Telenor in July 2016. Dec 14 Dec 15 Sep 16 Warid also carved out 5 MHz spectrum out of the spectrum it had, to offer LTE services. 9
GROWTH OF MOBILE BROADBAND HAS BEEN FURTHER FACILITATED BY THE MERGER OF MOBILINK AND WARID Integrating network assets will create better quality mobile network, and new products and services at scale, e.g., mobile financial services, mobile apps, value added services Cost efficiencies will lead to investment for availability of broadband services in underserved areas The merger is expected to contribute to overall industry growth and competitiveness 10
GROWTH OF MOBILE BROADBAND HAS BEEN FURTHER FACILITATED BY THE MERGER AND SPECTRUM AWARD 2016 (In millions) 120 100 80 60 40 20 0 Zong 26 Million Warid 11 million Award of 10 MHz in 850 MHz spectrum to Telenor and Merger have increased competition in 4G/LTE services Zong, Telenor and Mobilink /Warid are offering 4G/LTE services to their customers (In millions) 120 100 80 60 40 20 0 Zong 26 Million Telenor 38 Million Mobilink / Warid 51 Million Note: Accessibility is defined as total number of subscriptions that can avail or have access to 4G/LTE network 11
Extensive Data Usage on 3G Networks 45,000 40,000 2G 3G 4G Total 39,820 Total 35,000 Terra Bytes (TBs) 30,000 25,000 20,000 15,000 10,000 3G Launch 4G Launch 6903 11614 8,634 12443 9,594 17325 13,689 18,790 14,841 20,604 20,989 15,934 16,282 23,980 17,942 28,535 8,089 3G 4G 5,000-4,448 1243 1322 1,243 1,322 1,887 2,392 2,837 2,583 3,021 2,954 3,070 2,892 3,503 3,196 1964 2578 363 63 143 266 616 996 1,600 1,815 2,536 1,601 691 Jan-14 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jul-16 2G 12
NATIONAL SPECTRUM MANAGEMENT STRUCTURE Pakistan Telecommunication Authority (PTA) Frequency Allocation Board (FAB) Ministry of IT & Telecom (MoIT) receive applications for the use of radio frequency spectrum and subject to grant of licences, refer such applications to the Frequency Allocation Board (FAB) for assignment of spectrum; Undertake spectrum auctions or other transparent competitive process to determine eligibility for assigning spectrum allocate and assign portions of the radio frequency spectrum analyzes and assigns the portions of Radio Spectrum to intended wireless users performs necessary international coordination and agreements with other administrations Issue necessary policy directives PTA in consultation with FAB provides recommendations to MoIT on spectrum strategy, refarming, spectrum assignment / demand / supply, etc. 13
SPECTRUM TRADING UNDER TELECOMMUNICATION POLICY 2015 The purpose of spectrum trading is to allow markets to determine the best use of spectrum. Spectrum trading will be subject to license conditions and approval by PTA / PEMRA under intimation to FAB. A spectrum trading framework will be developed by PTA, PEMRA and FAB, and will be subject to policy level approval by Federal Government (MoIT).Factors like spectrum capping shall be considered while developing such framework. A Processing Fee and any other applicable fee will be levied to cover re-issuing of licenses. The decision to trade is a commercial decision for the license holder. The terms of the trade will be a commercial agreement between licensees. 14
SPECTRUM TRADING UNDER TELECOMMUNICATION POLICY 2015 Spectrum trading will be permitted only for spectrum that has been acquired through a pricing arrangement that represents its market value (i.e. auction). Spectrum may be traded between holders of the same license type only. For example, spectrum trading may take place between LL licensees or mobile licensees but not between an LL licensee. 15
SPECTRUM TRADING UNDER TELECOMMUNICATION POLICY 2015 Spectrum will not be traded by any licensee with the necessary license conditions until the licensee has fulfilled its payment and roll out obligations unless it also transfers its roll out obligations with the trade and same is verified and authorized by PTA. The acquirer of spectrum will be required to obtain (or already hold) the appropriate telecommunications license and to meet the terms of that license. The framework for spectrum trading will take into account the effects of such trading on competition, national security, public health and safety, compliance with the national laws and policies and compliance with international obligations and international relations. 16
SPECTRUM TRADING FRAMEWORK (2016) UNDER CONSULTATION Interested parties will apply to PTA, under intimation to FAB, on a prescribed form seeking permission for either category of spectrum trading. Spectrum may be traded between holders of the same license type only Spectrum trading will be permitted only for spectrum that has been acquired through a pricing arrangement that represents its market value (i.e. auction) Spectrum will be traded only if the relevant license that contains the spectrum assignment to be traded, permits trading. Spectrum assigned to a licensee without such a permit will not be traded unless Federal Government (MoIT) specifically authorizes the trade as being in the public interest. 17
SPECTRUM TRADING FRAMEWORK (2016) UNDER CONSULTATION Permissible forms of spectrum trading: Outright sale of the rights and obligations (Transfer) Spectrum Leasing: sub-leasing not allowed to third party Spectrum swapping Spectrum Cap: maximum 75% of the total spectrum held by a licensee Trading Terms and Pricing: Spectrum trading is allowed on commercially agreed terms including prices between the parties 18
SPECTRUM TRADING FRAMEWORK (2016) UNDER CONSULTATION Processing Fee: Rs. 500,000 (almost USD 5,000) for cellular mobile licenses Rs. 100,000 (almost USD 1,000) for Local Loop licenses (Note: Processing fee levied on both transferor and transferee) Spectrum trading shall not change the original period of spectrum assignment Use of traded spectrum is based on technology neutral policy 19
SPECTRUM TRADING FRAMEWORK (2016) UNDER CONSULTATION Procedure The transferee and transferor will submit spectrum trading application to PTA. The PTA may seek public opinion from all concerned regarding spectrum trading and its impact on competition, national security, public health and safety, compliance with the national laws and policies and compliance with international obligations. Detailed assessment of whether the proposed transfer raises sufficient competition concerns. In case, the transfer is executed, the transferor and the transferee shall surrender their licenses to PTA and PTA will issue new licenses reflecting the terms of the trade. 20
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