ISLAMABAD: Telecom sector has warned perverse policy of pegging spectrum fees to the dollar pushing the country into the dark ages by compromising the government’s digital vision programme.
The recent business confidence survey conducted by the Overseas Investors Chambers of Commerce and Industries (OICCI) revealed a significant decline in business confidence in 2023.
Aamir Ibrahim, the CEO of Jazz, expressed deep concern, particularly highlighting the more intense situation faced by the country’s telecom sector.
In a tweet, Aamir emphasized the gravity of the declining business confidence among OICCI members. He underscored the telecom sector’s vital contribution to the economy, with an overall investment of $ 25 billion and over Rs 1.1 trillion in exchequer contributions between the fiscal year 2017 and 2022 alone.
Aamir explained that the telecom services are burdened with a 34.5 percent tax, plus there is a 29 percent corporate income tax on companies, a four percent super tax imposed last year, and a proposed further increase in the budget. These hefty taxes result in more than half of the telecom sector’s earnings being directed to the government.
Additionally, the sector faces the challenges of a dollarised cost structure and interest rate hikes, which have led to a staggering surge in business costs for telecom companies.
Jazz CEO cautioned that the telecom industry’s dollarised cost structure had caused the per-user average revenues to dip to $ 0.75 - the lowest globally.
“An ARPU [average revenue per user] below $ 1.5 is not sustainable for the industry to operate.”
Moreover, the devaluation of the Pakistani rupee has severely impacted the telecom sector, as spectrum prices, renewals, and even installment interest are linked to the US dollar. Aamir highlighted the alarming 86 percent increase in forex rates over the past two years, which has completely jeopardized the telecom business case and exposed the sector to unprecedented levels of uncertainty.
The network energization cost, on the other hand, has also increased manifolds as fuel and electricity tariffs have increased by 172 percent, 67 percent, respectively. Given the capital-intensive nature of the telecom sector, even a single-point increase in interest rate translates into an additional financial burden of Rs 1.5 billion for the industry and there has been fourteen-percentage-point increase in the interest rate compared to 2021.
Aamir urgently called for intervention from the government, emphasizing that the telecom industry is currently experiencing an existential crisis. He stressed the need for a prompt resolution of the policy linking telecom license fees to the US dollar in order to protect the sector’s sustainability and ensure the provision of essential digital connectivity for Pakistan’s progress.
Copyright Business Recorder, 2023