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Cabinet members have suggested that half of telecom spectrum auction proceeds should be deposited with the Universal Service Fund (USF), the entity responsible for developing digital infrastructure in the country.

The suggestion came in a recent meeting of the cabinet, chaired by the prime minister. While discussing the upcoming spectrum auction, the cabinet members suggested transferring 50% of proceeds from the spectrum auction to the USF.

The cabinet formed a committee, headed by the finance minister, to monitor the spectrum auction process. The committee will determine the percentage of spectrum auction proceeds to be allocated to the USF for nationwide tower fiberisation in support of digital infrastructure development.

The cabinet observed that the condition of mark-up – Karachi Inter-Bank Offered Rate (Kibor) plus 3% – for deferred payments was too stringent and should be revisited to bring it to Kibor plus 1%. Some cabinet members recommended that the terms of deferred payment should be relaxed by allowing the licensee to pay any percentage of the amount payable after one year of the issuance of a licence, with the remaining payment to be made in 10 equal annual installments starting from the second year of the issuance of the licence.

The cabinet was of the view that in order to ensure complete transparency, the proceedings of the spectrum auction should be broadcast live on all media channels, as was done during the recent privatisation of Pakistan International Airlines (PIA).

The Ministry of Information Technology and Telecommunication (MoIT) informed the cabinet that the proposal for the auction of licences of International Mobile Telecommunications (IMT) spectrum for the improvement of mobile services in Pakistan was aimed at increasing the speed of 4G by five times and that of 5G by 13 times.

The cabinet was told that according to the GSMA’s Mobile Connectivity Index Report 2023, Pakistan was ranked the lowest in South Asia in spectrum allocation, which was evident from the slow speed of internet and the proposed auction of spectrum would elevate Pakistan to a middle-tier country in terms of spectrum allocation.

The MoIT said that successful bidders would have the option to either opt for full upfront payment or go for deferred payment by releasing a minimum 50% payment by the first anniversary of the licence issuance date with the remaining amount payable in five equal annual installments from the second anniversary of the licence.

The cabinet was informed that the deferred amount would carry a cumulative mark-up of one-year Kibor plus 3% per annum and the spectrum licence fee would be specified in the licence in equivalent of Pakistani rupees instead of the US dollar.

Accordingly, the decision taken by the Economic Coordination Committee (ECC) was placed before the cabinet for ratification. Following consideration of a summary titled “Ratification of the Decisions taken by the Economic Coordination Committee,” the cabinet gave its nod for the ECC decision in respect of the “IMT Spectrum Auction for Improvement of Next Generation Mobile Broadband Services in Pakistan.”

The cabinet also constituted a committee, named the “Cabinet Committee on IMT Spectrum Auction for Improvement of Next Generation Mobile Broadband Services,” under Rule 17(2) of the Rules of Business, 1973, comprising the finance minister as convener and the economic affairs minister and IT minister as members.

The committee will steer and monitor the IMT spectrum auction process and streamline, if required, the payment terms, including the upfront payment structure, deferred payment options and installment arrangements.

According to the terms, the decisions taken by the committee will not require ratification of the cabinet in terms of the proviso to Rule 17(1)(c) of the Rules of Business, 1973. All bidding and auction processes to be carried out by the federal government or any of its entities will be broadcast live to ensure transparency.