Government Loses Rs. 10 billion on 3G Frequency Auction

Government Loses Rs. 10 billion on 3G Frequency Auction
KTM, 8-Jan-12
By Ramesh Shrestha

The government’s decision to provide 3G frequencies to leading GSM mobile operators without going through the auction process has caused a revenue loss of Rs 7-10 billion. This is what the parliament’s Public Accounts Committee (PAC)’s Frequency Allocation Investigation Sub-committee’s report has suggested.

The report prepared after a year of investigation categorically states that government agencies, especially the Ministry of Information and Communications (MoIC) and Nepal Telecommunications Authority (NTA), were responsible for the ‘illegal’ allocation of 3G frequencies.

According to the report, 3G frequency allotted to Nepal Telecom and Ncell and 2G frequency awarded to non-GSM mobile service operators were provided directly at different times either by an adhoc decision of the ministers for information and communications or the NTA chairmen.

The then NTA chairmen assigned 3G frequency to Nepal Telecom and Ncell without holding consultations with the Radio Frequency Policy Determination Committee, according to the report. This caused a revenue loss worth billions of rupees to the country, the report said.

The report has recommended that 3G and Wimax frequencies be allocated through auction process henceforth and a fee be set for 3G spectrum based on the auction price. “The government should then charge the fee for the allocated 3G spectrum from Nepal Telecom and Ncell,” recommends the report. “Auctioning frequency is a must as it can generate huge revenue to the government.” The then NTA Chairman Dinesh Kumar Sharma assigned 10 MHZ frequency each to Nepal Telecom and Ncell temporarily for one year on May 29, 2006, and July 29, 2007, respectively.

Pasi Koistinen, chief executive officer of Ncell, said the company received the frequency for both 2G and 3G services as per the NTA guideline and regulations. “There is no licence provision for 3G here. 3G is the evolution of 2G technology and we have already obtained its licence,” he said.

The report also said MoIC and NTA have time and again flouted the rules while issuing licence for limited mobility service. NTA, according to the report, provided GSM spectrum to small telecom operators—Smart Telecom and STM Telecom—although the provision of limited mobility and mobile frequencies were not included in their licence conditions. The definition of basic telephone service was amended while awarding licence to Nepal Satellite Telecom. “The regulator allocated frequency to Nepal Satellite Telecom with a capacity of 2.8 million subscribers. What is the rationale behind providing GSM 900 and GSM 1800 frequency bandwidths to the company that has only acquired licence for Mid-Western Nepal?” report questions.

The sub-committee that submitted its report to PAC Chairman on Sunday has come with 22-point conclusions and suggestions, including further investigation by the Commission for Investigation of Abuse of Authority (CIAA) and stern action against MoIC and NTA officials involved in telecom frequency allocation. The report has recommended that all NTA decisions made after January 14, 2011 (when the sub-committee was formed) be scrapped. NTA, during this period, allocated GSM frequencies to Smart Telecom, made permanent the 4 MHz spectrum allocated to Ncell temporarily, and provided International Long Distance (ILD) Gateway to Nepal Satellite Telecom and Smart Telecom.

Prakash Chandra Lohani, coordinator of the sub-committee, said radio frequencies were allocated in the past without keeping in mind that they could generate huge revenue. “This report will work as a guideline to curb irregularities and help provide quality service to consumers by creating competition among service providers. The report will be discussed in the full committee and ratified accordingly before issuing directives to the government.


What the report says
• Government lost revenue worth Rs 7-10 billion revenue in 3G spectrum allocation
• NTA’s move to renew Nepal Telecom mobile licence flawed
• GSM spectrum allocation to Smart Telecom and STM Telecom violates licence conditions
• Telecommunications Radio Frequency Distribution and Price Policy 2011 be scrapped
• MoIC take steps for telecom infrastructure sharing provision
• Royalty, licence renewal fee and committed royalty fee cannot be waived
• A policy be devised to allocate spectrum in a scientific manner