The telecom watchdog’s recently-released annual industry report reads like it was a job well done in FY22 despite all the odds. Indeed, it is good to see that the industry revenues were up by nearly 7 percent year-on-year to Rs694 billion in 2021-22, as per data in the said report by the Pakistan Telecommunication Authority (PTA). Within that pie, mobile network operators witnessed a slightly higher growth of 8 percent year-on-year to Rs500 billion, fixed-line operators grew their cumulative topline by 12 percent year-on-year to Rs90 billion, whereas LDI operators saw a 12 percent revenue decline to Rs40 billion.
The industry’s topline growth last fiscal, however, stands negative in real terms, after adjusting for inflation (CPI averaged 12.15% in FY22). This reflects operators’ challenges in monetizing a subscriber base that is growing year-on-year but whose weak purchasing power makes communication-related spending price-sensitive. No wonder the main indicator of Average Revenue per User (ARPU) stood at the same level in rupee terms (Rs220 per month) in FY22 as it did in FY18, as per the PTA’s report.
Key is to expand the provision of high-speed mobile broadband (especially 4G) services. While mobile broadband subscriptions (3G and 4G combined) have grown over the years to 124 million subscriptions, the current penetration rate of 56 percent is unimpressive, considering that soon it will be nearly a decade since these ‘next-generation mobile services’ were first introduced in Pakistan. Assuming that every third subscriber is using two Sims (Multiple-Sim phenomenon), the number of unique mobile broadband subscriptions comes to 93 million – that would yield a 42 percent penetration. Lots of room to grow!
The report notes that the industry’s contribution to the national exchequer surged by 44 percent year-on-year to reach Rs325 billion – an increase of almost Rs100 billion! However, such a large jump in the treasury proceeds was not due to a sudden increase in the usage of telecom services and any subsequent jump in telco’s revenues. It was mainly due to the collection of spectrum-auction-related fees and license-renewal-related payments from the concerned MNOs. As there has been no auction lately, FY23 will see a decline on this front.
Overall investment in the industry, as per the PTA report, reached $2.07 billion in FY22, a huge increase of 55 percent year-on-year. This growth is at odds with the net foreign direct investment (FDI: inflows less outflows) that came in at negative $29 million during FY22 (down from an already-low level of $35 million in FY21). The increase in overall industry investment reflects more the fact that a spectrum auction took place in FY22 (for which the operator arranged the payment through local sources) than any big jump in core capital expenditures (excluding spectrum and license fees) for network expansion. Core capex has actually seen a double-digit decline through much of 2022, as per the recent financials of some MNOs.
Local assembly of mobile handsets is where full credit is due to the regulator for providing an enabling environment. The report highlights that 30 companies were working in this field as of September 2022, creating 26,000 jobs and assembling ~17 million handsets during Jan-Sep 2022, out of which 43 percent of phones were 4G smartphones. With the CBU mobile imports on a sharp decline in recent months and considering that close to half of the phones on Pakistan’s network are 2G, the assembly of 4G phones must be increased. But for that to happen, the macroeconomic fundamentals need to see a turnaround.
As highlighted several times in this column in recent months, these are tough times for both the service providers and the users. Meanwhile, with the government facing fiscal challenges, the regulator has little authority or space to make things easier for telco’s or users. Considering how telecom services are the backbone of digital economy, it is hoped that the persistent macroeconomic headwinds will not subdue service providers to such an extent that it is no longer a surprise to see service disruption or de-gradation.
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