Telcos Considering to Not to Participate in Upcoming 3G / 4G Auction

Mobile phone companies operating in Pakistan are planning to boycott upcoming 3G / 4G auction after broken promises from Punjab Government for removal of internet taxes, increased taxes on telecom services and equipment, inept policies and government’s non-serious and stubborn behavior towards telecom sector, we have learned from senior management of telecom companies.

“One should not consider our absence in upcoming 3G / 4G auction as a protest, but rather a rational business decision based on investments we have made so far and the returns that we are getting after recent internet taxes”, said a C-Level executive of a mobile phone company who wanted to remain unnamed.

Telecom companies invested over $2 billion dollars during last one and half year for the the 3G / 4G spectrum and next-gen network roll-outs. As a result, 3G uptake during 2014 remained tremendous, however, later on in 2015 things went shady and results remained below expectations mainly due to SIM re-verification exercise from February 2015 to May 2015.

Also Read: Telcos Didn’t Invest Billions on 3G/4G for Lahore to Tax the Internet

Then during late May 2015 Punjab Government imposed 19.5% taxes on internet usage for mobile users in Punjab, a province that holds 60% of mobile phone users and where mobile phone companies were most aggressive in terms of 3G roll-outs.

Negative impact on 3G growth rate is evident from below graphic:


Operators say that as a result of prevailing business conditions, their overall revenues have dropped significantly due to deduction of heavy taxes constituting half of their earnings (50 percent) at present which are unbearable for them in long-term, hence their investment to expand 3G/4G technologies network is inevitably affected.

Majority of telecom operators have halted or at least slowed down their network expansion plans that has limited 3G outreach in new areas, especially for rural population who don’t have any other means of internet.

“We had invested several million dollars in Pakistan based on the promises and commitment from the government, that had then agreed to facilitate cellular phone sector through incentives but it took u-turn by introducing new taxes on data services and mobile internet, which is rarest in the world. We don’t have a choice but to re-route our investments to other growth markets with higher ROI”, said a senior official of a telecom company that has presence in multiple markets including Pakistan.

Government is likely to generate Rs. 5-6 billion through internet taxes, however, the expected loss in economy as a result may amount to several hundred billion rupees

Telecom companies say that they invested billions of rupees and lost multiple folds more by seizing their business activities for over four months to complete Biometric Reverification of SIMs by letter and spirit, however, their efforts and endeavors were not recognized in turn of tax relieves.

Also Read: Internet Taxes by Punjab can Cause National Economy Up to Rs. 200 Billion in Losses

“After recent internet taxation regime from current government, one shouldn’t be surprised if FDI in telecom sector goes down. They should also not worry about multiple fold negative impact on overall economy due to decreased FDI coming into the country and lower internet penetration”, said a telecom expert.

The unfavorable business environment of telecom sector and stubborn attitude of federal and provincial government (mainly Punjab Govt) is leading to the failure of next spectrum auction which is expected to generate $500 million next year.

Also Read: Here’s Why More than 75% Mobile Users Aren’t Happy with 3G Services

Tech reporter with over 10 years of experience, founder of ProPakistani.PK

  • I think the companies SHOULD protest against ALL the taxes on cellular usage . Pakistan is one of the few unfortunate countries to have the worst and most *******(insert random Gali) government in the world!

  • Agreed that the Internet taxes have made a huge problem to all of us and even I am frustrated by all of that, but I have noticed that you are too much biased on the govt. Not denying it is a fault of govt., but Telcos bhi koi farishtey nahi hain. They don’t give the damn tax (50% from their earnings), they charge it from the consumers who are the basic tax givers. So who the hell are they to cry over taxations since even a single penny does not move out of their pockets!!

  • Tax may be one of the reason but Quality of service of 4G operators is decreasing day by day

    Users started using expensive 4G hoping to get decent speed but the speed got pathetic as user base increased

    Couple of weeks ago 4G was my primary connection and now I use again wired DSL as primary due to deteriorating speed of 4G

    Telcos need to take measures to improve the speed and “beating the tax bush” will not satisfy the user base

    • To improve speed , they need to spend more money. If they spend more money, and the government doesnt stop this sabotage in the name of taxes, the telecos WILL suffer.
      As to make up for the price, the telecos will ultimately have to either push the taxes onto their users (which some of them have) as a result, less people will use 3G/4G as it seems to be getting expensive for them.

  • What I don’t get is why you are after the taxes in Punjab only, is Punjab the entire Pakistan? Or are you saying that you represent Punjab only?

    All the provinces in Pakistan have that tax and then there is the tax by the federal govt.

    You’re acting like this is ProPunjabi . pk (domain name idea, maybe) and relaxing the tax in Punjab means the entire country.

    Before you say that it has to be taken in steps and Punjab is the first, I don’t see any articles (complaining like you are these days) when Sindh, KPK and Baluchistan implemented the tax and Punjab didn’t.

    What I am against is the bias you show.

    • Punjab has over 60% of all mobile phone users in Pakistan, and hence they contribute a major share. Once Punjab will revert its taxes, it will be lot easier to ask KPK or Sindh to do the same.

      Currently, KPK and Sindh won’t listen as bigger province has not relieved the industry yet. So I, or the telcos, aren’t against a specific province only.

      • Perhaps thats another biased comment since you never made a single post about the taxes on KPK or Sindh as this regime in Punjab is implemented recently while other provinces have been a victim of this regime for long but you never acted out to show your sympathy … Is it only the Punjab you’re after ? Or is it the PML-N ???

        • Go to top left and search “KPK Internet tax” to see the posts we did on the topic. Please get out of politics.

          • imo, you cant talk about taxes in KPK and Sindh because they have already been challenged in courts. I doubt you can comment on matters on which hearing is underway. Right now, other provinces have told the respective courts that Punjab applied the same tax. They have stronger arguments now. This is the trend that must be discouraged. CCP should be empowered to stop collusion of provinces.

  • Tax increases >>>>> people pays more>>>>> people decreases spendings >>>>> telcos profit decreases>>>>>slow death.

  • Proud Of Our Telecom Companies for boycotting <3
    This will build pressure on Government and internet taxes will be reversed..Yahooo :D

  • They cry because the increased prices have led to people opting for other services instead of their internet services as it goes just on par with PTCL’s pricing after these taxations.
    Thus reducing the number of people spending their money on 3G as it simply is too slow and seemingly expensive.

    • Other services? What other services? Can you please elaborate? People had been using the “other services” since the very beginning. Internet is a need now and we people still consider 3G/4G as a luxury!

      • Other services means ptcl etc. As they seem cheaper for people .
        3g / 4g has the status of a luxury BECAUSE these taxes make it pretty dang expensive!
        Recharge tax, internet tax, all add up to increase the cost by 30% atleast!
        If we subscribe to a 1500 per month package, due to this Jagga tax, we have to pay 2000 rupees! 33% extra! Just because of these taxes! Now if this doesnt help 3g/4g reach the status of luxury, i dont know what will.

        • You’ve got a fair point here.. But the Telcos won’t boycott sh*t because they are still getting huge profit out of it.. And better yet, “Something is better than nothing”. People get excited for nothing here.

          Plus, what is the source of this article? How can one be sure if they really are considering not to participate in the upcoming auction?

          • But the profit isnt as much as it would and SHOULD be… the 3g/4g was supposed to increase the telecos profits but there seems to be minimal change in profits after this.. THIS can be a reason for boycott. The main thing that attracted the telecos towards 3g/4g was profits.. if it werent for that. I dont think they would ever have even considered participating in the auction.

            • Boycott and let all the investment go waste? This isn’t gonna happen.. Mark my words, all the telcos will participate in the auction again irregardless of the taxes! At the end of the day the customer has to pay the taxes from his own pocket and Pakistan is full of people who still can afford 3g/4g. Those who can’t there always are other options like PTCL etc.

        • I dont know about india but our leaders have indeed made Churchill’s predictions true about tax on air and water.

  • It’s due to the genius tax generation policies of our very competent and “Chartered Accountant” Mr. Ishaq Dollar.

    • I laugh at those who love/vote for PMLN, but isnt it worth something that a mere chartered accountant could prop up our reserves to nearly $20 billion? Sir, IMF does not serve money on a silver platter. Try asking those State bank officials who have been assisting ministries during pre/post review meetings.

      • Well…okay, but is it rational to squeeze the existing tax net for more tax, rather than creating a wider one?. The point I was trying to make was according to the article and the suffering of us users in the end, but I guess you’re too impressed with that $20 billion loan money “reserves” to understand it.

      • but still Warid is not consistent with its speed .. plus you don’t have 3g to fall back on when 4G is not available. . .
        Zong gives more than 25Mbps on average… whereas 20Mbps on Warid is a rare event.

    • In my point of view, Telenor is 2nd in coverage but 4th in speed. 0.10 Mbps i am experiencing it from 4 months.

  • is this the equal distribution of wealth a billionaire and a poor have to give same taxes on everything this is why the the difference between upper class and middle class is increasing day by day. Absolutely ridiculous policies government are imposing

  • I hope everyone who was part of puting TAX on internet will get cancer in his/her ***hole

    • This is a rare type of cancer in the world which called as an*l cancer. And it has the least number of treatments among all types. I second you for this wish. May soon they get affected. :P

  • Propakistani gave this news in Jan-2014

    This news could not become true and Propakistani did not give any update is this this regard. Now when Pakistan is getting DTH service in near future as per information provided on PEMRA website, there is no discussion on this important Technology issue.
    Complete details are available on PEMRA website.

  • I disagree. Telcos did not do anything special for the country. In fact, they received tax concessions, delayed payments facility, objectionable LIBOR based interest rate, blocked passage of new operators, got tax evasion investigations suppressed, colluded during auction process, submitted bids from the ‘comfort’ of their office, got base prices decided in their favor, and then did not bid more than the base price, committed but did not pay in US dollars, got loans from OUR banks to pay OUR license fee, did not bring any money from their parent companies from abroad, and who knows what else? I am not even talking about the exploits, transgressions and blatant violations of laws by PTCL yet.
    Once again, they will blackmail our government (however bad it may be) in order to get more concessions and get laws bent. Right now, they are crying just because some telcos (and in a way govt.) are more corrupt than them.
    Regardless, I am happy that we have 3/4 G. We are no more cavemen.

  • what a joke no country has this much high tax rate. we pay 30-40% tax. and no body bothers in this country. no one. :(

  • That ugly looking “Haraam Dar” has done another agreement with IMF to
    further tax the public and industries to receive more loans from it.
    While the economy is getting better and stable, why is he taking
    more loan from Jews?

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