Zong raises concerns over PTCL’s acquisition of Telenor and Orion Towers amid CCP review

The Competition Commission of Pakistan (CCP) has entered the fourth hearing of its Phase II Merger Review regarding Pakistan Telecommunication Company Ltd’s (PTCL) proposed acquisition of Telenor Pakistan (Pvt) Ltd and Orion Towers (Pvt) Ltd, which would impede market competition.

The Chairman, Dr. Kabir Ahmed Sidhu, and the Members, Salman Amin and Abdul Rashid Sheikh, have scheduled the review for October 24^th, 2024.

Rahat Kaunain, current legal counsel of PTCL and former Chairperson of the CCP, stated that they do not anticipate any competition issues in the immediate future as a result of the transaction. However, PTCL stated that they are prepared to provide a comprehensive response if the CCP requires further clarification for the review process.

Zong, represented by external counsel Asad Ladha and Sameen Qureshi, raised significant concerns over the potential concentration of market power, particularly regarding spectrum allocation. Zong emphasized that the merger would result in PTCL’s market share in the telecommunication sector increasing to 36.50%, and it would become a very large entity with considerable control over the upstream, wholesale, and retail markets.

Zong was also concerned that this would result in a decline in their market share to only 25.6% of the total telecom market, which would be detrimental to competition. One of the concerns was the control over 34.4% of the total allocated spectrum in the retail mobile telecommunications market following the merger. Zong posited that this would render the newly merged company highly competitive in AJK & GB and other regions.

The PTA Director-General of Wireless Licensing, Amer Shahzad, identified spectrum allocation as a significant concern during the hearing. He disclosed that the 900 MHz spectrum, which is essential for MNOs, is already being utilized by a variety of Cellular Mobile Operators (CMOs). He stated that additional spectrum may become accessible by 2025; however, he concurred with Zong’s concerns regarding Telenor-Ufone’s total spectrum holdings, which will reach 39.60% and Zong’s 19.80%, respectively.

Spectrum allocation is significant in the sense that it has the potential to influence market power. This merger will grant PTCL a substantial quantity of spectrum, as each spectrum band has varying levels of efficiency and coverage. This, in turn, could impact the telecommunications sector’s competition structure and levels of service quality.

During the hearing, Asad Ladha, the counsel for CM Pak, recommended that the CCP implement vertical restraints to mitigate anti-competitive concerns following the merger. One suggestion was a non-compete clause that would necessitate PTCL to submit an exemption application to the CCP. The regulations aim to safeguard against potential monopolies and to encourage free competition in the telecom sector.

Barrister Ambreen Abbasi, CCP’s Senior Legal Advisor, inquired of the PTA whether it has any policies regarding spectrum asset divestiture or sharing. In response, Amer Shahzad referenced the   “Spectrum Sharing Policy” by PTA, which sets guidelines for spectrum sharing between operators to enhance utilization and address capacity issues.

The CCP’s ongoing evaluation will continue to investigate the merger’s overall significance and its impact on the telecommunication industry and competitive structure in Pakistan. The merger’s impact has been the subject of opinions from the attorneys representing PTCL, Wateen Telecom, and Jazz in previous hearings.

The potential market impact of this transaction is currently being evaluated by CCP’s legal team which includes Shahzad Hussain (Director General/Registrar), Barrister Ambreen Abbasi, Hafiz Naeem, Arshad Javed, and Marryum Pervaiz (Head of the Merger Department) of the CCP.

The future of the proposed merger and its impact on the telecommunication industry in Pakistan will be further illuminated by the decision that will be made during the upcoming hearing session on October 24^th, 2024.