Image Source: Pakistan today

The current economic crunch has added to the woes of the people and has worsened the prevailing challenges in many industries; especially the telecom industry. While regulatory issues regarding taxation, spectrum allocation and prices of license renewal have continued to hamper the Mobile Network Operators (MNOs) in Pakistan, what gets little attention from local policymakers is the resulting decrease in profits and investment; which is particularly true for MNOs that have foreign ownership.

When mobile broadband services were launched eight years ago, the five MNOs that had heavily invested in 3G and 4G services were confident in winning back the investment by an increased earning; however, most telecoms could not make the profits they were initially expecting and contrary to their estimates had started to lose the average revenue per user (ARPU).

Recently, local telecom players have had to shift their focus to growing subscribers rather than investing in expanding the telecom infrastructure of the country. As ARPU for most telecoms continues to reduce, despite the enhanced 4G network coverage, organic growth has become harder to achieve. In such circumstances, we have already seen one major merger with rumours of another telecom looking to exit the market, in contrast, smaller telecoms such as Ufone (that got their 4G license only one year ago) have to re-strategise to make sustainable growth in the industry.

Starting with the macroeconomic crisis of 2018-19 and recently the Covid pandemic, Pakistani telecoms have made some incredible efforts to keep citizens connected during these challenging times; despite all the changing demand patterns and amplified data demand. Also, the quality of service issues has become more pronounced. While tackling these problems remains a priority for all telecoms; the exacerbated macroeconomic situation leaves no respite in sight.

What comes as a major area of concern for Pakistan is that out of the 4 large telecom players in the country. Three of them have HQs based in foreign countries and so any organic revenue gained has been minimalistic due to the sharp depreciation in Pakistan’s currency, dealing a severe blow to foreign direct investment (FDI) in the telecom ecosystem as well as the growth for the telecoms in Pakistan. During such times, the decision to buy spectrum, renew licenses and provide bandwidth, equipment and components becomes extremely expensive for local telecoms, as the prices for all these allocations are placed in U.S Dollars, with little margin for profit for the MNOs.

Considering that the top-three MNOs all refrained from participating in last year’s spectrum auction (held in September) due to these issues highlighted above, the new government is faced with the opportunity to respond constructively and address the telecom industry’s main concerns.

Moving forward, it will be essential for the government to provide some much-needed respite to the local telecoms and bring down taxes and appreciate that it is the MNOs and their investment in local telecom infrastructure that has played an instrumental role in the development of the digital economy of Pakistan, especially during the demanding days of the pandemic. As the government is faced with difficult decisions, it would be in the country’s best interest to trust the local telecoms with building a more digitally inclusive Pakistan and understand that economic stability can be realised through ensuring seamless connectivity and providing greater accessibility to not just the people, but the telecom industry.