The Economic Survey (2010-11) released here on Thursday categorically declared that the higher rate of sales tax and federal excise duty (FED) on telecom sector has resulted in lower revenue collection from telecom services. The Survey revealed that during 2009-10, telecom sector contributed to the exchequer through taxes, license fees and other duties of Rs 109.1 billion, which is about Rs 2.5 billion less than the previous year.
During the last five years, over Rs 500 billion poured into the national kitty in lieu of taxes and duties. The decline in contribution is mainly because the market has reached saturation point and additional subscription is lowering every year, which is reflected in lower activation tax collection.
Pakistan Telecommunication Authority (PTA) has collected over Rs 13.56 billion in 2009-10 as initial license fee, USF and R&D contribution. This amount was 48 percent higher than the Rs 9.15 billion collected in the previous fiscal year. During the past 5 years, telecom sector invested over $11 billion in all segments of the sector and created millions of job opportunities in the country. Since the telecom sector is heading towards maturity, investment is also contracting with time.
In 2009-10, telecom sector invested over $1.13 billion in total which is about 508 million less than the previous year. Cellular mobile share in total stake remained about 80 percent with coverage for infrastructural expansion of over $908 million extended to all regions of Pakistan.
Telecom sector attracted over $6.3 billion FDI in the last 5 years, which is an encouraging response by the investors to Pakistan telecom sector policies. UAE, Norway and USA remained the major sources for FDI during last five years. Out of total $6.3 billion FDI in the sector, UAE invested over $2 billion and its share was more than 32 percent while USA and Norway brought FFDI worth $890 million and $639 million respectively.
Share in telecom FDI of both of these countries comes out 24 percent. China is another source of FDI for telecom sector with contribution of $582 million in last five years. Rests of the FDI, brought by other countries are including Singapore, Netherlands, United Kingdom and Hong Kong, etc.
Recently the growth of FDI in telecom sector declined slightly due to saturation in the telecom market. But another wave of FDI is expected after the launch of 3G services by Pakistan. In 2009-10 alone, telecom sector attracted over $373 million FDI which is about 17 percent of the total FDI landed in Pakistan during 2009-10. During the last 6 months (July-December 10) telecom sector received over $111 million FDI inflow which becomes 13.4 percent of total FDI during this period.
Telecom Sector revenues improved steadily in the 2009-10 and 6.55 percent growth rate was witnessed. Total telecom sector revenues reached Rs 357.7 billion in 2009-10 compared to Rs 333 billion the previous year. Cellular mobile sector remained in the forefront of revenue generation. Its revenue increased by about 11 percent in the current year from Rs 212,423 million last year to Rs 236,046 million in the 2009-10. Its share in total telecom revenue stands at about 70 percent in 2009-10 compared to 64 percent in the previous year.