Baby Leone
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EVERYBODY knew that renewing a licence to be a mobile operator in Pakistan was not going to be a straightforward task, but nobody realised that it would be as chaotic as it has turned out to be. On May 24, the licences of two of the country’s largest mobile operators — Jazz and Telenor — are set to expire after they hit their 15-year life, and the process of renewal has dragged so long and so hard that both companies have had to approach the courts with a plea that the “government should be stopped from taking any adverse action that limits the ability of the operators to carry on their business”, according to a petition filed in the Islamabad High Court last Friday.
The court is now scheduled to hear arguments from both sides on May 14. Both companies are asking the government to renew the licence at the same dollar price at which the licence was acquired back in 2004, when the auction was originally held. The price at that time was $291 million. The government, spurred by the court action, entertained the request to proceed with the renewal request in the cabinet meeting held on Tuesday and decided that in the light of the spectrum auctions held in recent years, the licence should be renewed at $450m instead.
Both companies are now set to contest that figure with the argument that the telecom policy, as well as the relevant clauses in the licence itself, require that the first renewal take place at the same price that the licence was originally acquired at.
The recourse to the courts became necessary when both companies found that the government was not moving on their original request for renewal that was submitted more than two years ago, according to senior officers familiar with the matter in both companies. These officers spoke with Dawn on condition that their names not be used because of the sensitivity of the matter.
Last-minute scramble to agree on price of licence renewal
“When our request for renewal was originally sent,” one of these officers told Dawn, “the government was distracted by issues of its own.” Ever since there has been so many changes of people at the top that they found it difficult to get the attention of anyone who could take the process forward for them. “By the time the new government came into power, much time had already been lost and we still had no clear indication of how the renewal process would proceed.”
Then finance minister Asad Umar took up the process and began to coordinate its execution, which required the involvement of the IT ministry and the Pakistan Telecommunications Authority (PTA), the sector regulator that has to issue an implementation order once the price and the process have been decided. But once he was removed from his position, both companies were back to square one again.
With only weeks to go before the expiration of the licence, both companies found themselves in a position where they could face an expiration of their licence without any renewal, meaning the continuity of their business would be in jeopardy, which in turn would necessitate instructions to their parent companies that might be forced to issue notices to their shareholders in international stock markets that their Pakistan operations faced a risk to business continuity. Such a notice would have severe adverse consequences for the share price of the parent companies, thereby sending a message to global markets that Pakistan is a risky place to invest in since the government has a difficult time discharging its obligations towards investors.
The involvement of the court has spurred the government to act. In the meantime, the court has issued a stay to the government to not take any action, so officers of both companies are confident that if the government tries to issue the implementation order of the cabinet decision, and press its claim for $450m for licence renewal, they will have a good case to argue that the action constitutes contempt of court. And when the government presents its case before the court on May 14 to say that they have now started to move on the renewal process, the companies feel they will be able to argue that the demand for $450m is contrary to the law, and continue their case before the court.
“All laws and regulations point to $290m as the price of renewal,” says one of the officers involved in the matter. “The government is sticking to $450m out of fear of NAB only.”
For now, if the stay order remains in place, both companies will be allowed to continue operations beyond the expiration of the licence while they negotiate the price with the government. The risk they now face, according to the company officers, is if the court vacates the stay and leaves both parties to their devices to settle the issue between them. Given the short timeline, the companies would then be at a serious disadvantage. The other scenario is more optimistic, the officers say, where the court entertains the companies plea that the government “is not interpreting its own policies in a legal manner”.
Published in Dawn, May 10th, 2019
The court is now scheduled to hear arguments from both sides on May 14. Both companies are asking the government to renew the licence at the same dollar price at which the licence was acquired back in 2004, when the auction was originally held. The price at that time was $291 million. The government, spurred by the court action, entertained the request to proceed with the renewal request in the cabinet meeting held on Tuesday and decided that in the light of the spectrum auctions held in recent years, the licence should be renewed at $450m instead.
Both companies are now set to contest that figure with the argument that the telecom policy, as well as the relevant clauses in the licence itself, require that the first renewal take place at the same price that the licence was originally acquired at.
The recourse to the courts became necessary when both companies found that the government was not moving on their original request for renewal that was submitted more than two years ago, according to senior officers familiar with the matter in both companies. These officers spoke with Dawn on condition that their names not be used because of the sensitivity of the matter.
Last-minute scramble to agree on price of licence renewal
“When our request for renewal was originally sent,” one of these officers told Dawn, “the government was distracted by issues of its own.” Ever since there has been so many changes of people at the top that they found it difficult to get the attention of anyone who could take the process forward for them. “By the time the new government came into power, much time had already been lost and we still had no clear indication of how the renewal process would proceed.”
Then finance minister Asad Umar took up the process and began to coordinate its execution, which required the involvement of the IT ministry and the Pakistan Telecommunications Authority (PTA), the sector regulator that has to issue an implementation order once the price and the process have been decided. But once he was removed from his position, both companies were back to square one again.
With only weeks to go before the expiration of the licence, both companies found themselves in a position where they could face an expiration of their licence without any renewal, meaning the continuity of their business would be in jeopardy, which in turn would necessitate instructions to their parent companies that might be forced to issue notices to their shareholders in international stock markets that their Pakistan operations faced a risk to business continuity. Such a notice would have severe adverse consequences for the share price of the parent companies, thereby sending a message to global markets that Pakistan is a risky place to invest in since the government has a difficult time discharging its obligations towards investors.
The involvement of the court has spurred the government to act. In the meantime, the court has issued a stay to the government to not take any action, so officers of both companies are confident that if the government tries to issue the implementation order of the cabinet decision, and press its claim for $450m for licence renewal, they will have a good case to argue that the action constitutes contempt of court. And when the government presents its case before the court on May 14 to say that they have now started to move on the renewal process, the companies feel they will be able to argue that the demand for $450m is contrary to the law, and continue their case before the court.
“All laws and regulations point to $290m as the price of renewal,” says one of the officers involved in the matter. “The government is sticking to $450m out of fear of NAB only.”
For now, if the stay order remains in place, both companies will be allowed to continue operations beyond the expiration of the licence while they negotiate the price with the government. The risk they now face, according to the company officers, is if the court vacates the stay and leaves both parties to their devices to settle the issue between them. Given the short timeline, the companies would then be at a serious disadvantage. The other scenario is more optimistic, the officers say, where the court entertains the companies plea that the government “is not interpreting its own policies in a legal manner”.
Published in Dawn, May 10th, 2019
