Revenues generated by Telecom operators in Pakistan in a single fiscal year reached all time high at Rs. 445.7 billion during 2012-13, said Pakistan Telecommunication Authority’s annual report on telecom industry.
Report said that revenues of telecom operators grew by 8.9 percent during 2012-13 and reached Rs. 445.7 billion, up from Rs. 409.2 billion during same duration previous year.
Report said that increasing revenues from the telecom sector indicate the strength and size of the market despite the economic difficulties and tough competition, especially in the cellular sector.
Moreover, revenues of LDI operators grew by over 200 percent, all thanks to ICH.
Telecom Revenues (Rs. in Billions)
Not to mention, telecom operators are now exploring new avenues to earn from, reducing dependence on the voice channels alone. It is expected that influx of 3G technology into the telecom market will further boost the revenues of the sector.
Telecom Contribution to National Exchequer
Telecom sector is one of the highest contributors to the National Exchequer, putting Rs. 119 billion per year in the National Kitty on average for the last five years.
Despite growing cellular subscribers, increased traffic and higher taxes, the fiscal year 2012-13 saw lesser contribution to the National Exchequer from telecom sector i.e. Rs. 124 billion as compared to Rs. 133.41 billion deposited by telecom sector in FY2011-13.
General Sales Tax (GST) forms the major part of the contribution with Rs. 57.78 billion collected by FBR from telecom sector.
A huge sum of Rs. 53.52 billion has been paid by the telecom operators under various heads such as duties, withholding tax, fees etc.
PTA has also received Rs. 6.8 billion from the operators under various regulatory heads and deposited into the National Exchequer till March, 2013 while Rs. 7.52 billion was collected under the Activation Tax head.
Telecom Sector Contribution to National Exchequer
- GST for the province of Punjab is estimated for the fiscal year 2012-13
- Note: PTA’s contributions comprise of all its receipts including Initial and Annual License Fee, Annual Radio Frequency Spectrum Fee, Annual Spectrum Administrative Fee, USF and R&D Fund Contributions, APC for USF, Numbering Charges, License Application Fee, etc.
- Others include custom duties, WH Tax and other taxes.
With 188 million population and 128.93 million cellular mobile subscribers, Pakistan’s telecom sector provides enormous opportunities for foreign and local investors.
International telecom companies have significant presence in Pakistan. These companies are successfully doing business in all over the country.
Telecom sector of Pakistan has attracted substantial foreign investment after the deregulation. During FY 2005-06 to FY 2011-12, telecom sector attracted over US$ 12 billion of investments including US$ 6 billion FDI.
However, during recent couple of years, as telecom companies have already established most of their networks, companies have reduced their investments.
During FY2012-13, a total of US$ 472 million investment has been reported in the telecom sector, showing 96 percent growth over the investment of US$ 240.3 million in the year before.
This increase in investment is mainly contributed by the cellular mobile segment followed by FLL and WLL segments.
Recently, cellular mobile companies have also increased investments in their networks in anticipation of up-coming 3G/4G services in the country.
Investments by Telecom Sector
Despite the excellent growth in overall investment, Foreign Direct Investment (FDI) still remained on the negative side of the scale due to more capital outflows by companies than inflows.
The negative FDI of US $408 million during the FY 2012-13 can possibly be turned around by conducting further spectrum auctions such as 3G auction to introduce new technology in the country and resultantly bringing substantial foreign investment into the country.
Foreign Direct Investment
During the FY2012-13, import of telecom equipment and telephone/cellular handsets reached US$ 918.4 million, declining slightly from the figure of US$ 954.05 million during FY2011-12.
The import of mobile handsets increased to US $467.1 million from US $465.3 million at the end of previous fiscal year.
The rise in the demand for smart phones in the country has substantially increased the overall import bill of handsets.
Government of Pakistan, earlier this year, imposed the duty of Rs. 1,000 per handset on the import of smart phones. This may not be helpful in reducing the demand for handsets; however, it may encourage smuggling and sub-standard Chinese handsets in the market.
In order to curtail the burden on import bill, Government should encourage the private sector and multinationals for local manufacturing/assembly of handsets and telecom equipment.