Telecom Sector Outlook and Spectrum Trading: the Case of Pakistan

Shahbaz Nasir

Pakistan Telecommunication Authority

ITU Workshop on “Economic Aspects of Spectrum Management” 21st – 23rd 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 6th 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 (6th Largest • Population is young and becoming more Population) Land Area 796,095 km2 educated • 36th Largest Area Key Stats • Urbanization trend is expected to ▪ Income /Capita US $1560 continue, reaching a level of 45% by 2030 ▪ Literacy Rate 60% ▪ Median Age 21.2 ▪ Geo-strategic Location

3 Telecom Market in Pakistan

Cellular Fixed Wireless Long- Value Mobile Local Local Distance Added Network Loop Loop and Intl’ Service Operators Operators Operators Operators Providers

5 17 12 16 533

All the five MNOs are providing mobile financial services

4 Telecom Market Size

Data Revenues of Cellular Mobile Operators Telecom Revenues

5 Competitive Market

Cellular Mobile Market Share

6 Telecom Services in Pakistan are the most affordable in the World: consumers get benefited from competition Cellular Voice Revenues (Price) per Minute According to World 1.80 1.68 Economic Forum 1.60 1.38 Report (Network 1.40 Readiness 1.20 Index), Pakistan 1.00 0.93 0.77 is ranked No. 1 0.80

Rs. per minute 0.60 in affordability 0.60 index. 0.40 0.20 0.00 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 (during Jan to Dec) (As of month end) (during Jan to Dec) 2,000 400 375 1,872 16,000 1,800 13,734 350 14,000 1,600 278.4 8,827 300 12,000 1,400 1,353 10,000 250 1,200 191.9 8,000 6,668 200 1,000

In In millions 800 802 Rs millions 6,000 150 120.9 2,639 600 4,000 100 492 Rs billions 59 400 2,000 1,055 50 200 0 0 0 Dec 12 Dec 13 Dec 14 Dec 15 Jun 16 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Growth 105% 59% 45% 35% Growth 135% 63% 69% 38%

Source: State Bank of Pakistan 8 PROLIFERATION OF MOBILE BROADBAND IN PAKISTAN : ENABLING GROWTH IN DIGITIZATION OF SERVICES INCLUDING M- AGRICULTURE, M-COMMERCE)

PTA conducted successful spectrum awards in 2014 and 2016 2016 2014 Extra-ordinary response to 3G/4G services 40 37.0 • Auction for spectrum of • Award of 10 35 Next Generation Mobile MHz in 850 Services (3G in 2100 MH 30 MHz for 3G/4G and 4G in 1800 MHz) held 25 services to on 23rd April, 2014 20 16.9 Telenor in July 2016. • Award of additional 40 MHz 15 11.4 spectrum to Mobilink (10 MHz),Telenor(5MHz), 10 • Telenor has 3.8 Zong (10 MHz for 3G and 5 started 4G 10 MHz for 4G) and Ufone 0 services (5 MHz) for 3G/4G services (In millions) subscribers adband Jun 14 Dec 14 Dec 15 Sep 16 Bro

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

120 120 Award of 10 MHz in 100 850 MHz spectrum to Telenor and 100 Mobilink / Warid Merger have 51 80 80 Million

ions) increased competition in 60 4G/LTE services 60 (In mill

(In millions) Telenor 40 Warid 38 11 • Zong, Telenor and 40 Million million Mobilink /Warid Zong 20 Zong 26 are offering 20 26 Million 4G/LTE services Million 0 to their customers 0 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

2G 3G 4G Total 45,000 Total 39,820 40,000

35,000

30,000 28,535 3G

25,000 4G Launch 23,980 20,604 20,989 20,000 3G Launch 18,790 17325 17,942 ra (TBs) Bytes 15,934 16,282 14,841 Ter 15,000 13,689 12443 11614 9,594 10,000 8,634 8,089 6903 4G 4,448 1322 3,503 5,000 1243 2,837 3,021 2,954 3,070 2,892 2,536 3,196 1964 2578 2,392 2,583 1,815 1,243 1,322 1,887 1,600 2G 266 616 996 363 63 143 - 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 12 NATIONAL SPECTRUM MANAGEMENT STRUCTURE

Pakistan Frequency Ministry of IT & Telecommunication Allocation Board Telecom (MoIT) Authority (PTA) (FAB)

receive applications for the allocate and assign Issue necessary use of radio frequency portions of the radio policy directives spectrum and subject to grant frequency spectrum of licences, refer such applications to the Frequency Allocation Board (FAB) for analyzes and assigns assignment of spectrum; the portions of Radio Spectrum to intended PTA in consultation with wireless users FAB provides Undertake spectrum auctions recommendations to MoIT or other transparent on spectrum competitive process to performs necessary strategy, refarming, determine eligibility for international spectrum assignment / assigning spectrum coordination and demand / supply, etc. agreements with other administrations 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 Thanks

21