PTCL’s acquisition of Telenor and Orion Towers: PCC says there are no immediate competition concerns

ISLAMABAD: The Competition Commission of Pakistan (CCP) was informed on Tuesday that there are no immediate competition concerns arising from PTCL’s acquisition transaction of Telenor Pakistan and Orion Towers.

The Competition Commission of Pakistan (CCP) has advanced to the fourth hearing of its Phase II merger review into PTCL’s proposed acquisition of 100% stake in Telenor Pakistan (Private) Limited and Orion Towers ( Private) Limited. The review is being conducted by a bench comprising Chairman Dr Kabir Ahmed Sidhu, alongside members Salman Amin and Abdul Rashid Sheikh.

The hearing was adjourned until October 24, 2024.

Acquisition of Telenor, Orion Towers: PTA obtains its application

During the hearing, former CCP Chairman representing PTCL Rahat Kaunain responded by indicating that he did not see any immediate competition concerns arising from the transaction. However, PTCL said it was ready to provide a detailed response if the PCC bench deemed it necessary for the review process, a top competition expert added.

This in-depth review focuses on the potential concentration of market power, competitive dynamics and broader impact on the telecommunications sector. During the recent hearing, arguments were presented by Asad Ladha, external advisor CM Pak (Zong), accompanied by Sameen Qureshi. The Pakistan Telecommunication Authority (PTA) was represented by Amer Shahzad, DG (Wireless – Licensing). The PCC bench also gave opportunity to PTCL, Wateen, Jazz and Telenor to submit their comments during the hearing.

One of the main concerns raised during the hearing related to spectrum allocation. As a scarce resource, spectrum is a key determinant of the market power of mobile network operators (MNOs), with each frequency band offering distinct efficiency and coverage attributes. After the transaction, MergerCo is expected to control 34.4% of the total allocated spectrum in the mobile telecommunications retail market.

In previous hearings, legal advisors to PTCL, Wateen Telecom and Jazz presented their views on the implications of the merger. The PCC officials included Shahzad Hussain (managing director/registrar), lawyer Ambreen Abbasi, Hafiz Naeem, Arshad Javed (legal department) and Marryum Pervaiz (HoD merger department).

During the hearing, CM Pak Asad Ladha highlighted the importance of analyzing spectrum allocation for the merger, emphasizing that such analysis is essential to understand the market impacts. He suggested that the CCP consider imposing ancillary restrictions.

CM Pak proposed that ancillary restrictions could include a non-competition clause, which would require PTCL to file an application for exemption with the CCP. These restrictions are intended to limit anti-competitive behavior by setting limits on business activities after the merger.

He presented data showing spectrum shares before and after the transaction. Post-merger, Zong would own 23.46% of the spectrum in the 900 MHz band, positioning MergerCo in a dominant position in the market, particularly in regions like Azad Jammu and Kashmir (AJK) and Gilgit-Baltistan (GB).

During the hearing, PTA DG Licensing Amer Shahzad confirmed that there is currently no availability of 900 MHz spectrum as it has already been allocated to various cellular mobile operators (CMOs).

He noted that additional spectrum options may become available by 2025. He took note of CM Pak’s observation regarding the combined Telenor-Ufone spectrum share (39.60%) compared to that of Zong ( 19.80%).

Stakeholders have indicated that spectrum is a scarce resource that directly influences an MNO’s ability to compete. Higher spectrum shares often translate into a competitive advantage in coverage and quality of service, making spectrum allocation a critical factor in market evaluation.

Each spectral band offers unique benefits in terms of coverage and signal efficiency. After the transaction, MergerCo would control 34.4% of the total spectrum allocated to the retail mobile telecommunications market, raising concerns about increased concentration and potential market dominance.

The stakeholder highlighted that spectrum allocation mechanisms in Pakistan follow specific regulatory processes, but equality in spectrum allocation is not ensured globally. Allocation depends on factors such as investment policies, quality of service and coverage priorities.

PCC lawyer Ambreen, senior legal advisor, asked whether there are any PTA policies regarding the divestiture (sale or transfer) of spectrum assets by operators.

Amer Shahzad, PTA, DG Licensing, referred to the “Spectrum Sharing Policy” defined by the PTA, which describes the conditions under which spectrum sharing can take place between operators. This policy aims to improve spectrum utilization and resolve capacity issues.

Commercial Copyright Recorder, 2024