Opinion: Telcos are Demanding Too Much from the Govt!

Mobile phone operators in Pakistan recently wrote a letter to the Ministry of IT, making a set of recommendations that they feel are essential for the industry to deal with the ongoing COVID-19 outbreak.

Since all Mobile phone operators got together and presented a united front, action was taken immediately with the government constituting a committee to look at the demands of the telecom industry.

While we are sure that telecom operators are raising their voices for their rights, the letter’s content indicates that operators are perhaps demanding too much at a time when the government is over-burdened with extraordinary expenses due to the ongoing coronavirus crisis.

Before we analyze the merit of the demands, let’s look at what telecom operators have urged of the government:

1. Taxation Incentives

Mobile phone operators demanded the government:

  • Federal Government abolishes the Withholding (WHT) temporarily till the COVID-19 fight continues.
  • Federal and Provincial governments to work together for rationalization of GST @16% on country-wide basis.
  • Temporary suspension of applicable Taxes on Data services by the Federal and respective Provincial governments.

2. Reduction of NADRA BVS verification charges

NADRA charges PKR 23 for CNIC and related data verification through BVS and PKR 10 on hits on simple biometric verification for all types of SIM sales.

Telcos proposed government to revisit these charges, which would reduce Rs. 140 Million per month paid by the telecom industry to NADRA.

Telcos could ask for things that wouldn’t cost the government, such as additional spectrum that would ultimately benefit the consumers

3. Reduction in USF and R&D Fund contributions

Telecom Industry contributes 1.5% of its annual gross revenue (AGR) towards Universal Service Fund and 0.5% in R&D Fund (Ignite).

Telecom operators urged the government to let go of this contribution for a period of two years, or at the very least implement a discount of 50% in the contribution.

4. 3G/4G Services in AJK & GB

Telcos currently can’t offer 3G and 4G services in AJK and GB. Telcos said they should be allowed to offer data services in these regions to around six million potential customers.

“We recommend an immediate availability/award of spectrum in 1800 and 2100 MHz bands to the CMOs to enable provision of reasonable mobile broadband services in the region”, urged the industry.

5. 50% reduction of Annual Regulatory Dues (ARDs) for one year

To limit the potential business impact due to a decline in revenues during the fight against Covid-19, mobile phone operators requested for 50% reduction in the upcoming payout of their Annual Regulatory Dues (ARDs) to PTA.

Most of the Demands are Telco Centric

Taxation part seems very valid, considering that mobile phone users pay a lot of taxes. Actually up to around 30% of a mobile card load goes into taxes (18.5% to 19.5% GST and 12%WHT).

Rationalization of this tax is essential, and its been ages that government hasn’t paid any attention towards this very exuberant amount of tax that’s collected from mobile phone users.

This is where we are with telcos, and a more saner tax regime is need during COVID-19 and afterwards as well.

Beyond this (first) point, almost every other demand is going to sweeten the balance sheet of operators, and won’t probably impact the consumers in a very direct manner.

While governments are mandated to safeguard industries, ProPakistani thinks that these demands could cost the government hundreds of millions of rupees at a time where it simply cannot afford to lose any money, and as such, are a bit too much.

While we aren’t against any such relief if it’s granted to the industry, we think that while making these recommendations, the telcos put personal gain over benefitting customers and the greater good of the country.

We believe that operators should focus on increasing their revenues, and consequently positively influencing the national economy, rather than trying to get tax or fee cuts from the government, which is already bearing the brunt of the deadly pandemic.

Moreover, telcos can probably ask for things that wouldn’t cost the government, such as additional spectrum (probably in equal proportion to their currently allotted spectrum), and which would ultimately benefit the consumers.

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

  • Now this is the real Amir Atta we have always admired since a decade. His grit and bold stances are beyond immeasurable. It takes guts to say the right thing. He must have heard severe displeasure of many by now.
    When Supreme court abolished taxes on mobile airtime loads, telcos responded by gradually raising their tariff since. Whats the point? End user ended by paying more. Yes i know dollar went North, but most of the fixed and variable costs of these telcos were not being incurred in dollar terms.
    Govt should subject every favor given to telcos to certain time bound conditions. Failure to comply must authorize govt to recover money it could have received without extending cuts or subsidies or favor etc. to telcos.
    If telcos are having a hard time doing business here, they should simply leave. We are not forcing them to stay put.

    • Well said bro,
      Infacts telcos developed a united platform to grab more and more insensitive from govt,and pay in penny to end users.

    • In my humble opinion, inviting foreign investment in the country through incentives and then taking them away and subjecting them to highest tax and after they have spent billions in sunk cost, saying leave if you want to seems a little unfair I believe.

      • The promised incentives have already been exhausted. Theres no such favor pending any more. Had this been the case, these companies would have sued govt. in a court of law.
        They are not paying highest regional tax on their own income and revenue. There is no special tax regime on income of telcos. In fact they are allowed to repatriate their profits to their parent companies which causes flight of forex. This must be stopped.
        The highest tax in region, they talk about, is actually the tax we (users) pay. Telcos simply collect them on behalf of govt. Only we can whine about taxes if at all.
        Guess what? witholding and other taxes collected by telcos are not always deposited in govt. accounts. FBR has already convicted a large operator for such a brazen tax fraud. Despite strict monitoring, taxes are still being siphoned off by all operators.
        Remember, chorr machaey shorr.

  • Just a while back I read about the Karachi Empress Market Pet market during this Corona. Most pets, birds, animals, died.
    It was un-accessible during all these days. I gave my suggestion only mobile internet camera. You can talk to your heart pets, whistle, and arrange something there. Its the mobile phone. Decade before a program of VOA (Voice of America) when mobile phone was about to launch spectrum. I arranged a janitor lady to speak to the moderator of mobile phone for his assignment of cleaning homes. From mobile she could call her clients.
    My humble submission today is the day of PON/FTTH equivalent of 5G. It can start tomorrow. Subsidy of USF, low cost. We have to re-invent FTTH and 4G phone.

  • I believe only financially healthy organisations can ensure quality services and products. While some of these asks may seem telco-centric as you say, there seems to be good reasons given behind them. Spectrum in AJK not only benefits people but also brings money for govt. USF kitty is independent of covid fight and underutilized.

  • What about demand of spectrum of 3G and 4G in AJK & GB… Why Govt is still procrastinating in the COVID … release of spectrum will definitely help all stakeholders esp the end users.

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