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.
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.