In the telecom sector in Pakistan the business and investment environment challenging for some time and urgent policy reform is needed to ensure that connectivity continues to drive economic activity and digitalisation.
As the telecom sector’s cost structure is dollarised in terms of spectrum fee, capex, fuel, electricity, etc, the companies also face a massive blow with the depreciation of local currency. Moreover, a breakdown of loans obtained through the private sector during FY2023 showed that telecom is among the highest borrowers, with a total loan of Rs 63.2 billion, and the highest fixed investment among all sectors, amounting to Rs 48.3 billion.
Industry experts revealed that the telecom sector has been facing pressing challenges for a couple of years now. This sector because of its capital-intensive nature, is among the highest borrowers to meet its substantial investment requirements, mainly amid record-high interest rates.
According to Pakistan Telecom Authority (PTA), the telecom sector has contributed 4.3 per cent to Pakistan’s GDP in the first quarter of 2023. The telecom sector’s contribution to GDP has been growing steadily in present years. In the first quarter of 2022, the telecom sector contributed 4.1 per cent to Pakistan’s GDP. The telecom sector’s growth in the country is driven through the increasing use of mobile phones and internet services. Statistics showed that the number of mobile users in Pakistan has reached 180 million, and the number of internet users has reached 100 million.
The number of cellular subscribers in Pakistan fell from 190.95 million to 190.90 million by end of July 2023 as per PTA data. The cellular teledensity fell from 80.34 per cent by end June to 80.04 per cent by end July. Total Teledensity fell from 81.43 per cent by end June to 81.12 per cent by end July 2023.
Sources recorded that in July 2023 PTA received 13,459 complaints from telecom consumers against dissimilar telecom operators and cellular operators, out of which, 12 222 were resolved, explaining a slowdown in addressing complaints as it remains over 96 percent on average.
The PTA mentioned that the telecom sector is also playing a major role in the economic development of Pakistan. The sector is employing millions of people, and it is also assisting to enhance e-commerce and other digital businesses.
It has committed to furthering the growth of the telecom sector in the country. PTA said that it is working to better the quality of telecom services in Pakistan, and it is also working to promote the use of telecom services in new areas.
As the growth of the telecom sector is an optimistic sign for the economy of Pakistan. No doubt, this sector offers career opportunities, promotes economic development, and enhances the quality of life for people in our country.
On the other hand, the number of 3G and 4G users in Pakistan increased by 1.37 million from 124.39 million by end June to 125.76 million by end July. The Monthly Next Generation Mobile Service (NGMS) penetration increased from 52.34 percent by end June to 52,83 percent by end July 2023.
Statistics also revealed that the complaints were received against various telecom operators during July. It is also important to note that cellular mobile subscribers constitute a major part of the overall telecom subscriber base. Therefore, the maximum number of complaints belongs to this segment. The Total number of complaints against CMOs by July reached at 12,826, out of which, 11670 were addressed.
Different sources also recorded that PTA also received 138 complaints against basic telephony, out of which, 110 were addressed during July, for a resolution rate of 79.71 per cent. Furthermore, 485 complaints were received against ISPs, of which, 433 were addressed.
As per the State of Pakistan’s Economy report released by the State Bank of Pakistan, Pakistan’s telecom sector has an average revenue per user (ARPU) of $0.80 per month, in stark contrast to the global average of over $8. The ARPU is a key metric to gauge the financial health of cellular mobile operators.
It is important to note that even amongst the neighbouring states, the Pakistani telecom sector is operating at less than half the revenue, with monthly ARPU data for India and Bangladesh at $1.7 and $1.6 respectively. This sector, as per the report, is grappling with challenges like high corporate taxation, which is impacting their earning prospects.
A sector-wise analysis meanwhile, reveals a significant drop in profit repatriation for telecom companies during FY2023. Repatriation is the ability of a firm to send profits to its home country. The fall in repatriation, the report suggests, can be attributed to foreign exchange constraints and a decline in profits for some corporations because of a slowdown in the domestic economy.
The government experts planned that the 5G services will be launched within 10 months. It is said that all the hurdles in the launch of 5G services will be removed on a priority basis, adding that issues relating to taxation, teledensity and spectrum will be addressed.
Effective initiatives will be taken for the provision of quality services to masses, and expressed the resolve to facilitate people through 5G auction.
The country ranks very low in terms of quality of service for cellular users at 79 out of 100 by the Inclusive Internet Index. It was observed that one of the main reasons for this is the lack of investment in the telecom infrastructure.
In Pakistan the telecom operators only have 274 MHz spectrum to serve the 7th largest number of telecom users globally, whereas, a single telecom operator in Australia uses over 345 MHz. For better telecom services, the Government of Pakistan must ensure immediate improvement in 4G infrastructure and accelerate the rollout of 5G in the country.
In the coming years, experts analysed that the sector has expected to continue to grow after the government plans to invest heavily, while the increasing use of mobile phones and internet services has expected to drive further growth.