Telcos’ Excessively High Expenses Threaten 5G Development in Pakistan

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Three out of four Mobile Network Operators (MNOs) in Pakistan have annual spectrum expenditures that exceed 10% of their earnings, posing a danger to the country’s 5G growth.

This was discovered in official Ministry of Information Technology and Telecommunication documents. Coleago Consulting, an international consultant, conducted research on the Pakistan spectrum, which is now being reviewed by the ministry.

The high cost of the spectrum may compromise operators’ capacity to invest in and sustain affordable services, resulting in delayed MBB network development and more expensive, lower-quality MBB services. It will stifle long-term social and economic digital progress.

The papers urged that the government take steps to make spectrum more affordable to operators. Many governments throughout the world adopt mechanisms such as yearly payment and delayed payment, among other things, to ease the financial burden of operators, particularly in the early years of network roll-out.

Countries with cheap spectrum auction costs and extended-spectrum license terms typically have greater network coverage, a broader range of services, more take-up, and more competitive markets. According to a GSMA econometric analysis, high spectrum charges have a detrimental impact on customer outcomes by limiting financial capabilities for network expansion.

The papers also said that high spectrum costs hindered the implementation of 3G and 4G networks in underdeveloped nations, resulting in long-term declines in overall network quality. Spectrum costs are falling globally. According to a Coleago Consulting study, the Spectrum Price Index (SPI) is calculated as total spectrum cost divided by monthly mobile revenue.

The SPI for 3G is 6, 4 for 4G, and 2 for 5G. This equates to a yearly spectrum cost of 3% of sales for 3G, 2% for 4G, and 1% for 5G. In China, the United Arab Emirates, Saudi Arabia, and Kuwait, the figure is less than 1%.

The Coleago research also evaluated the yearly cost of the spectrum on MBB investment and came to the following conclusions:

A 5% increase in spectrum costs is unlikely to deter investment in mobile broadband and 5G. There is also evidence that a lower proportion will produce better results for 5G adoption.

The yearly cost of spectrum in many well-developed 4G regions is 5-9 percent of mobile revenue. This suggests that spending less than 10% of the yearly budget may not have a major negative impact on network rollout.

When the cost of spectrum equals 10% of mobile revenue, operators may have budget restrictions, implying that investment in mobile broadband and 5G would be slower than it would otherwise be. Spectrum costs that exceed 10% of revenue pose a threat to the development of 5G.