Telecom sector for tackling ‘digital emergency’
In January 2022 the SBP issued a digital bank licensing framework that provided flexible requirements for setting up online banks. PHOTO: FILE
The telecom industry has urged the new caretaker government to address the prevailing “digital emergency” and stop the country’s advance towards a “digital catastrophe”.
The industry is looking at caretaker IT and Telecom Minister Dr Umar Saif with hope that he will be able to tackle the digital emergency and avert the threat of digital catastrophe.
While a robust and stable telecom sector serves as the foundation of a digital ecosystem, driving virtually all sectors of the economy and enabling consistent improvements in service quality for users, the financial health of the telecom industry has been hit hard by an unprecedented rise in business costs, primarily fuel, electricity, interest rate and a constantly increasing dollar-pegged spectrum installments.
This situation, according to industry players, has reached a point where it threatens the very survival of the telecom sector.
In a tweet, cellular mobile operator Jazz CEO Aamir Ibrahim congratulated the minister on assuming the new role while voicing concerns about the deteriorating financial health of the telecom sector.
Aamir said that despite the telecom sector’s crucial socioeconomic contributions, including investments surpassing $25 billion and a contribution of Rs1.1 trillion to the national exchequer in recent years, it “faces an existential crisis due to an alarming surge in business costs, largely stemming from the wrong policy of pegging telecom spectrum prices to the US dollar.”
He stressed the need for a prompt resolution of the policy linking the telecom licence fee to the US dollar to protect the sector’s sustainability and ensure the provision of essential digital connectivity for Pakistan’s progress.
It is worth noting that the devaluation of Pakistani rupee has significantly impacted the telecom sector. Spectrum prices, renewals, and even interest installment are linked to the US dollar.
Over the past two years, the industry has consistently highlighted the alarming surge in forex rates, which has destabilised the telecom business landscape. However, this issue remains unresolved.
On the other hand, the cost of network energisation has soared due to increases in fuel and electricity tariffs.
Given the capital-intensive nature of the telecom sector, even a slight increase in interest rate translates into an additional financial burden of Rs1.5 billion for the industry and there has been a significant rise in the rate compared to 2021.
Amidst the challenging economic climate, the telecom sector players face a dual challenge. On one front, the dollar-denominated spectrum prices continue to rise, while the sector’s earnings exhibit negative growth in dollar terms for foreign investors.
The average revenue per user (ARPU), a pivotal metric for assessing the financial health of cellular mobile operators, has plummeted to the unsustainable lowest global standing for around two to three years.
The industry urged the IT minister to implement all necessary initiatives, including the newly established Special Investment Facilitation Council (SIFC), to address the longstanding demand of telecom sector reform.
Published in The Express Tribune, August 19th, 2023.
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