Best Practices inBest Practices inLicense RenewalLicense Renewal

Muhammad Aslam Hayat

Vice President, Telenor Pakistan

IMPORTANCE OF RENEWALAn early, fair,transparent

andparticipatory

renewalprocess and

resultantrenewal onreasonable

terms would:- promoteinvestors’

confidence- act as an

incentive forlong term

investment

Uncertaintyabout licenserenewal is a

mainconsideration

for mobilecompanies in

theirinvestment

decisions

High fees mightimpact financial

stability ofoperators and

reducepossibility of

furtherinvestment. It

would alsoconstitute a

barrier to faircompetition if

differentlicensees have

differentrenewal dates

A balanced andpro-investment

decision onrenewal will

have a positiveimpact on

internationaland domestic

investors

Mobilecommunication

is a long termbusiness

Predictabilityand

transparency inbusiness

environment ismust forbusiness

An early, fair,transparent

andparticipatory

renewalprocess and

resultantrenewal onreasonable

terms would:- promoteinvestors’

confidence- act as an

incentive forlong term

investment

Uncertaintyabout licenserenewal is a

mainconsideration

for mobilecompanies in

theirinvestment

decisions

High fees mightimpact financial

stability ofoperators and

reducepossibility of

furtherinvestment. It

would alsoconstitute a

barrier to faircompetition if

differentlicensees have

differentrenewal dates

A balanced andpro-investment

decision onrenewal will

have a positiveimpact on

internationaland domestic

investors

Previous discussion atSATRC

SATRC-11/INP-18, 24 – 26 November 2009, Colombo, Sri Lanka

LimitedKnowledgebase

Renewal MethodsAdministrative process:

Parties sit and negotiate terms and conditionof renewal. In most cases government takesfront seat instead of Regulator.

Pros:It reduces the risk of involvement of any thirdparty and negotiations take place with existinglicensees only. Existing operators have a chanceto actively participate in process and convincegovernment/regulator for reasonable terms

Cons:This process is inherently non-transparent,unless proceeded with public knowledge (e.g.,a press release for start of process) or holding apublic consultation

Re-auction of spectrum:License/spectrum is auctioned allowingexternal bidders to also bid and highest bidbecomes benchmark for renewal. Existingoperators are given first right of refusal.

Pros:This process is comparatively transparent andwould determine true value of spectrum/license.

Cons:External bidders can influence decision ofGovernment and chances of a crazy bid by anambitious bidder cannot be ruled out.Since it involves an auction therefore process istime consuming.

Administrative process:Parties sit and negotiate terms and conditionof renewal. In most cases government takesfront seat instead of Regulator.

Pros:It reduces the risk of involvement of any thirdparty and negotiations take place with existinglicensees only. Existing operators have a chanceto actively participate in process and convincegovernment/regulator for reasonable terms

Cons:This process is inherently non-transparent,unless proceeded with public knowledge (e.g.,a press release for start of process) or holding apublic consultation

Re-auction of spectrum:License/spectrum is auctioned allowingexternal bidders to also bid and highest bidbecomes benchmark for renewal. Existingoperators are given first right of refusal.

Pros:This process is comparatively transparent andwould determine true value of spectrum/license.

Cons:External bidders can influence decision ofGovernment and chances of a crazy bid by anambitious bidder cannot be ruled out.Since it involves an auction therefore process istime consuming.

Best PracticesEnsure regulatory certainty

and ease investors’ concerns

• Codify a clear regime of licenserenewal (renewal procedures,reasons for refusal and appeals)

• Adopt principle of renewalexpectancy

• Strike right balance betweencertainty in renewal processand regulatory flexibility

Procedures for Renewal In case of non-renewal

• Provide a minimum noticeperiod

• Delay vacancy of spectrum togive enough time for operatorsto adapt strategies

• Ensure exit strategies foroperators

• Ensure continuity of service toconsumers

• Initiate renewal process well inadvance of expiry

• Perform periodic forwardreview of market and needs

• Disclose and publish reasons fornon-renewal

• Adopt public consultationprocess

• Guarantee a right to appeal

• Codify a clear regime of licenserenewal (renewal procedures,reasons for refusal and appeals)

• Adopt principle of renewalexpectancy

• Strike right balance betweencertainty in renewal processand regulatory flexibility

• Provide a minimum noticeperiod

• Delay vacancy of spectrum togive enough time for operatorsto adapt strategies

• Ensure exit strategies foroperators

• Ensure continuity of service toconsumers

License Renewal fees

• Beware that heavy license feeburdens reduce possibilities ofmaking further investment

• Establish models for licensingand spectrum pricing

Change in license conditionsand obligations

Spectrum implications oflicense renewal

• Strike a balance betweenprotecting ongoing investmentand optimal exploitation ofspectrum resources

• Leveling the playing field atlicense renewal betweenoperators entering marketunder different regimes toavoid windfall gains

• Initiate renewal process well inadvance of expiry

• Perform periodic forwardreview of market and needs

• Disclose and publish reasons fornon-renewal

• Adopt public consultationprocess

• Guarantee a right to appeal

• Renewal process is a goodoccasion to review licenseconditions

• Ineffective mandatory serviceobligations can have anti-competitive impacts

Pakistan CasePakistan Case

Cellular OperatorsCellular Operators of Pakistanof Pakistan

(ex Mobilink & Warid)(ex Mobilink & Warid)

LICENSING TIMELINES

Paktel &Instaphone got

licenses

Instaphone seizedto operate in 2006

1992

Ufone got license

2004

Zong acquiresPaktel

2014

Telenor got 3G/4Glicense in auction

2017

1989

License issued toMobilink

1999

Telenor & Waridgot license in

auction

2007

3G/4G Auctioned onApril 23rd

4 Operators wonlicense for 3G

Services.1 Operator won 4G

services.

2016

PMCL got 3G/4Glicense in auction.

Spectrum Assigned with Different Licenses

ZONGJAZZ (Warid)UFONETELENORJAZZ (Warid)

OPERATOR Spectrum YearAwarded

FirstRenewal

Expiry Remarks

19891992

1998-9920042004

200420072014

20192022202920192019

Licenseawarded for

mobile cellularservices

(TechnologyNeutral License)

900 & 1800Mhz

JAZZTELENORUFONEZONG

JAZZTELENORUFONEZONG

900 & 1800Mhz

2014 2029

ZONG

TELENOR

JAZZ

1800 Mhz 2014 2029License

awarded forNGMS

850 Mhz 2016 2031

1800 Mhz 2017 2032

A mixed process consisting ofadministrative and re-auction

methods in two phases isproposed

Proposed RenewalPROCESS

A mixed process consisting ofadministrative and re-auction

methods in two phases isproposed

In first phase Licenses will be renewed through anadministrative process up to a target year onproportional renewal fee

In second phase, in the target year all spectrum will beallocated through market method (re-auction)

Proposed Framework forRenewal of Cellular Mobile License (2019)

JAZZ (Mobilink)

TELENOR

ZONG

UFONE

JAZZ (Warid)

HarmonizedExpiry

2029

Proposed Duration forauto-renewed licensebefore auction in 2029

EXPIRY 2022

EXPIRY 2019

EXPIRY 2019

7 Years

10 Years

10 Years

Expires during Cut-off Year

10 years

JAZZ (Mobilink)

TELENOR

ZONG

UFONE

JAZZ (Warid) EXPIRY 2019

EXPIRY 2029

7 Years

10 Years

10 Years

Expires during Cut-off Year

10 years

Suggested Approach

Administrative Renewaltill 2029

1

Market method in 20292 First right of refusal to

incumbents

3

Advantages of Proposal

For Operators Government/Regulator

• Availability of entire spectrum allocatedto Operators in 850, 900 / 1800 / 2100 MHzin 2029;

• Any other spectrum band suitable forMobile Broadband will also be availablefor auction in 2029;

• Increased supply of spectrum thus morechoices and depending on technologicaldevelopments, operators will have anopportunity in 2029 to re-look at lessefficient bands;

• Uniformity in all license conditions for alltimes to come;

• Licenses issued in 2016 (850 MHz) and2017 (1800 MHz) can be aligned to expirein 2029 as well

• Harmonized renewal for all times to comewith same terms and conditions for allplayers in market

• This will help Regulator in re-planningbased on developments in technologies in2029;

• Government will get market based valueof spectrum and only efficient operatorswill stay in the market;

• Harmonized renewal for all times tocome;

• Enhanced confidence of the investors ingovernment for this visionary reform inmobile sector;

• This balanced and pro-investmentdecision on renewal will have a positiveimpact on international and domesticinvestors and would serve as a greensignal for operators to continue to investin their networks and fulfil theirobligations.

• Availability of entire spectrum allocatedto Operators in 850, 900 / 1800 / 2100 MHzin 2029;

• Any other spectrum band suitable forMobile Broadband will also be availablefor auction in 2029;

• Increased supply of spectrum thus morechoices and depending on technologicaldevelopments, operators will have anopportunity in 2029 to re-look at lessefficient bands;

• Uniformity in all license conditions for alltimes to come;

• Licenses issued in 2016 (850 MHz) and2017 (1800 MHz) can be aligned to expirein 2029 as well

• Harmonized renewal for all times to comewith same terms and conditions for allplayers in market

• This will help Regulator in re-planningbased on developments in technologies in2029;

• Government will get market based valueof spectrum and only efficient operatorswill stay in the market;

• Harmonized renewal for all times tocome;

• Enhanced confidence of the investors ingovernment for this visionary reform inmobile sector;

• This balanced and pro-investmentdecision on renewal will have a positiveimpact on international and domesticinvestors and would serve as a greensignal for operators to continue to investin their networks and fulfil theirobligations.

THANKYOU