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investment cost includes the license cost for 3G spectrum, the cost of upgrading infrastructure and last but not the least investment with respect to purchasing 3G mobile handsets. As far the former two CAPEX (3G license and infrastructure) are concerned they have been taken into consideration based on figures provided by PTA. However, as mentioned earlier on that unlike UK and USA, cellular companies in Pakistan are not responsible for selling mobile handsets and mobile handsets are generally sold and distributed by dealers such as Mobile Zone and Advance Telecom throughout the country, the investment cost regarding mobile handsets were not taken into account due to irrelevance.

 

Based on the figures provided by PTA it was estimated that 3G license fees will be approximately $1 billion whereas the investment cost with respect to setup for 3G (UMTS) infrastructure that involves upgrading previous base stations (setup for 2G infrastructure) and transmitter are estimated to be approximately $200 million.

 

With regards to investment cost for my first model, I have spread the 3G license fees within a time frame of 10 years as it would be difficult for telecommunication companies in Pakistan to pay entire license fees at once due to the financial burden. As a consequence the government will provide them with the option to pay in phases within 10 years time frame. Payment in phases with respect to telecommunication industry can also be seen in past as government of Pakistan sold 26% shares of UFONE to Etisalat in 2006 for $2.6 billion however Etisalat still has to pay about $1billion. However the CAPEX of upgrading the infrastructure would be required to invest initially ($200 million). Therefore with respect to model 1 the investment cost incurred in initial year would be $300 million which has been demonstrated in figure 5.20 shown below.

 

However, as oppose to the first model where I have analysed the commercialization of 3G (UMTS) by considering Investment cost as $300 million, in the second model I have applied a different approach with respect to investment cost for variation in the scenario. Therefore, in order to analyze the circumstances from a different perspective, in second model I have assumed that the entire investment cost for 3G is incurred initially which means that $1 billion (3G license fee) plus $200 Million (CAPEX for upgrading infrastructure) that is $1.2 billion are considered as Investment cost in second model.

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