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Pakistan heading towards digital catastrophe, telecos says business plans not working out

Earlier, a report in Business Recorder said that the telecom sector generated record revenues of PKR 694 billion during the financial year 2021-22 in comparison to PKR 651 billion during the same period of 2020-21.

Edited By: Hritika Mitra @MitraHritika Islamabad Updated on: February 05, 2023 11:28 IST
People visit a market in the old area of Peshawar, Pakistan.
Image Source : AP People visit a market in the old area of Peshawar, Pakistan.

Chief Executive Officers of some of Pakistan's largest telecom firms have extended a warning about the country heading toward a digital catastrophe mainly due to the wrong policy of pegging telecom license prices with the US dollar, local media reported. Pakistan must take action and devise a plan for regulatory relief to avoid slowing down the digital development of Pakistan.

The CEOs  have said that the fluctuating exchange rate, increasing exchange rates, and fuel have caused uncertainty and have made it impossible for them to make a business plan."Due to the uncertainty caused by the fluctuating exchange rate, rising interest rates, fuel and electricity tariffs, made it impossible for them to make a business plan," Business Recorder quoted the chief executive officers as saying.

According to Business Recorder, the CEO of Pakistan Telecommunication Company Ltd Hatem Bamatraf in a tweet said, "With the constant devaluation of PKR against USD, the cost of doing business has significantly increased in the country. The expectation from telcos to invest heavily in infrastructure modernization while earning PKR is becoming detrimental to the dream of Digital Pakistan. We must act now and devise a strategy for regulatory relief to avoid slowing down the digital development of the country."

In another tweet, Hatem Bamatraf further said, "the situation has made business planning impossible due to the uncertainty caused by the fluctuating exchange rate, rising interest rates, fuel and electricity tariffs. On top of that telecom industry remains heavily and unfairly taxed," according to Business Recorder.

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Jazz CEO Aamir Ibrahim in a tweet said that the devaluation of Pakistani rupees has jeopardized the business case for telecom companies, as telecom licence fees and interest on installments are pegged to the US dollar, as per the Business Recorder news report. He tweeted, "PKR devaluation has jeopardized the business case for telecom companies, as our license fees & interest on installments are pegged to the US dollar. Last year 50% license renewal fee cost us PKR 44.5 billion, and this year, just 10% installment alone costs over PKR 13 billion."

Telenor Pakistan CEO Irfan Wahab expressed concern over the situation. Wahab said that telecom companies are exposed to massive currency devaluation risk as the telecom industry generates its revenue in PKR while spectrum auctions, renewal and installments are priced in US dollars, according to Business Recorder. "While telecom industry generates its revenue in PKR; spectrum auctions, renewal and installments are priced in US dollar exposing telcos to massive currency devaluation risk. Need to fix this mismatch before telecom companies' capacity to further power digital transformation gets irrevocably depleted," Business Recorder quoted Irfan Wahab as saying.

Earlier this month, a report in Business Recorder said that the telecom sector generated record revenues of PKR 694 billion during the financial year 2021-22 in comparison to PKR 651 billion during the same period of 2020-21. The report said that the economic slowdown and increased operational costs caused sluggish growth in the last quarter, according Pakistan Telecommunication Authority (PTA). According to official documents, the Foreign Direct Investment inflow in the telecom sector was USD 168.4 million while the outflow was USD 197.6 million, and net FDI was USD 29.1 million.

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