FDI by Telco’s Drop by 39%; Profits Sent Back Home up by 10% in 1st Half 2010-11

Telecom operators seem cautious to tighten their belts for Capital Expenditures (Capex) and Operational Expenditures (Opex) in Pakistan as Foreign Director Investment (FDI) has continued to drop by 39 percent in the first half of the current fiscal year 2010-11 (1HFY11).

State Bank of Pakistan (SBP) statistics showed that companies in telecom sector landed 111.2 million FDI in the country in 1HFY11 as compared with capital of 181.7 million recorded in the corresponding period of last fiscal year.

Telecom operators particularly in the cellular sector had announced to invest big amounts in the beginning of 2010 but they have failed to materialize it so far, apparently because their expenses were restricted outside the country.

Mobilink and Zong managements had announced in April of last year to invest US $250 million and US $300 million respectively in 2010 to expand their infrastructure and service quality in operating country.

The country received US $111.2 million FDI in telecom sector by 2010-end. The FDI landed by telecom operators was recorded US $ 108.6 million in April to June 2010.

SBP quarterly report mentioned that major inflows of FDI recorded at US$ 60 million in September 2010 by single Mobile telephony company.

Besides Qubee a broadband operator invested US $ 35 million in an estimate.

The major part of this investment was made on the revamping and repair work of infrastructure damaged by floods in July and August last year. More than 3104 BTS sites of cellular operators’ were damaged as reported by Pakistan Telecommunication Authority (PTA).

SBP report said that telecom operators witnessed US $ 16.8 million negative reinvestment of their earnings during July-Nov 2010, which shows losses to some operators in the sector.

The cellular operators – Mobilink, Telenor and Ufone – have also contributed to Rs 238.5 million to the flood relief funds.

Repatriation of dividends

The telecom operators have sent US $ 51.8 million to their homelands in 1HFY11 as profit or dividends, SBP reported.

The profits repatriation showed 10.7 percent growth in the closing half of current fiscal year as it were reported 46.8 million previously in the period of Jul-Dec of 2009.

  • 51.8M sent in FY2011 officially, what about the billions sent back through inflated transfer pricing?

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