Mobile operators’ revenue contracts sharply

user (ARPU), a key tool for gauging the financial health of cellular mobile operators (CMOs), has declined sharply, setting off alarm bells for the telecom companies in Pakistan. The ARPU per month has dropped from $9 in 2003 to around $1 at present. At the same time, the cost of doing business has surged in various cases which include increase in spectrum fee from $291 million to $486 million and rise in taxes over the years to 34.5%, making Pakistan one of the highly taxed telecom markets.

An analysis of the Pakistan Telecommunication Authority’s (PTA) annual report suggests that the ARPU of CMOs has been constantly on the wane in Pakistan and is among the lowest in the world. The CMOs’ ARPU in other developing Asian markets is well over $2 whereas in the developed countries it is around $30. According to Jazz CEO Aamir Ibrahim, “Pakistan has one of the lowest ARPUs in the world, which affects CMOs’ capacity to invest in network and spectrum.

To ensure consistent improvement in service quality and expand broadband services, a policy and regulatory environment that enables the mobile operators to remain financially healthy is critical. “The relevant policymakers need to ensure that the sector stays sustainable through assured return on investment. Unless the industry’s ARPU doubles in the next 12 months, there will unfortunately be no business case to further invest in enhancing quality or coverage.”

Another industry player pointed out that various countries were looking at ways to improve the financial health of cellular sector including devising pro-growth policies like reduction in licence fee, spectrum price and phasing out bank guarantees. However, Pakistan’s cellular sector is marred by abrupt changes in regulatory policies, regressive tax measures, extended power outages, unprecedented rupee devaluation, cash margin restriction on import of network rollout and upgrading equipment, which is contributing to the high cost of doing business.

Moreover, none of the budget proposals submitted by the telecom sector were considered and instead the federal excise duty on telecom users in Islamabad was increased from 16% to 19.5% whereas the regulatory duty on the import of optic fibre cable was raised from 10% to 20%, the industry player said. These moves “have retarded the ‘fiberisation’ plans of the private sector as well as the government-led Universal Support Fund (USF) programmes.

This fiberisation is a key step if the government plans on realising its vision of a smart nation.” Pakistan’s telecom industry, on multiple occasions, has pointed out that the sector lacks policy and regulatory predictability, especially with respect to measures relating to the health of telecom investments, which deters long-term investment and severely affects government’s objective of universal digitalisation.

At a time when the industry’s profit is constantly shrinking amid increasing operational costs, it said it would be unrealistic to expect investment in infrastructure development and improvement in the quality of services. The weak financial health of CMOs would also adversely impact the prospects of engagement in new spectrum transactions, despite the need for more spectrum, and the subsequent launch of 5G network in the country, the industry said.