Best Practices in License Renewal · to adapt strategies • Ensure exit strategies for operators...

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

Ufone got license

Zong acquiresPaktel

Telenor got 3G/4Glicense in auction

License issued toMobilink

Telenor & Waridgot license in

auction

3G/4G Auctioned onApril 23rd

4 Operators wonlicense for 3G

Services.1 Operator won 4G

services.

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

900 & 1800Mhz

2014 2029

TELENOR

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

JAZZ (Warid)

HarmonizedExpiry

Proposed Duration forauto-renewed licensebefore auction in 2029

EXPIRY 2022

EXPIRY 2019

7 Years

10 Years

Expires during Cut-off Year

10 years

JAZZ (Mobilink)

TELENOR

JAZZ (Warid) EXPIRY 2019

EXPIRY 2029

7 Years

10 Years

Expires during Cut-off Year

10 years

Suggested Approach

Administrative Renewaltill 2029

Market method in 20292 First right of refusal to

incumbents

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.