Mobile phone companies are going to put more focus on Punjab for their 3G and 4G network expansions as compared to Sindh and Khyber Pakhtunkhwa, we have learned through background interviews with various officials of telecom operators.
Mobile phone companies, who won’t admit the fact publicly, are now going prefer Punjab over Sindh and KPK for their 3G and 4G network expansion as both Sindh and KPK are charging higher internet tax rate of 18.5% and 19.5% respectively on data services, the main product of 3G and 4G networks.
This tax is making data services expensive in both Sindh and KPK and ultimately internet uptake is likely to be slower in both the provinces as compared to Punjab.
Telcos told ProPakistani that investments in Punjab make more sense for them as returns from the province are going to be higher as compared to two other provinces because Punjab slashed 19.5% internet tax and effectively made internet almost 20% cheaper as compared to rest of the provinces.
No tax means cheaper internet and hence more service usage by masses, which is exactly why investing in Punjab is more lucrative for telecom operators as compared to other provinces.
“Mobile phone companies aren’t alone in preferring Punjab for investments, for instance if you look at Haier, whose owners are originally from KPK, they established their mobile phone assembly plant in Punjab and not in KPK due to special tax incentives that Punjab agreed to give to the company”, said an official of a mobile phone company.
“Only a mad-man will open a shop at a place where commodities are expensive for customers due to taxes”
“While we are national companies and we just can’t prioritize provinces, but at the same time it is essential for our businesses to calculate ROI before investing in any city or province for that matter”, the official explained.
Another expert said that provinces are more independent now, especially after 18th amendment, and this should act as an opportunity for provinces to grab more investments by incentivizing businesses.
“A long-term vision could be to offer special incentives (say tax-holiday) for businesses, tech companies for instance, and all the tech giants and startups will at once shift to that province. Which might curtail the revenues of the province for some time, but new jobs, business activity and investments are going to compensate that tax-loss manifold within just few years”, explained the expert.
Another market expert said that after first two years of 3G/4G launch and particularly because of low returns, operators will get only more cautious about their selection of cities and provinces for 3G and 4G network expansions.
“Only a mad-man will open a shop at a place where commodities are expensive for customers due to taxes”, said the official.
KPK is consistently urged to slash internet tax of 19.5% that it charges on all sorts of internet including DSL, WiMAX, EvDO, 3G and 4G.
But since both Sindh and KPK are putting deaf ears on such demands, people from these provinces are ultimately going to bear the brunt in longer run.