Telcos Earned Rs. 537.2 Billion and Contributed Taxes of Rs. 137 Billion in FY2020: PTA

The Telecom sector in Pakistan withstood the impact of COVID-19 and showed sustainable revenues of Rs. 537.2 billion in the fiscal year 2019-20 (FY2020) as compared to Rs. 550.4 billion in FY2019.

The sector also made a significant contribution of $622.5 million (24 percent) to the total net Foreign Direct Investment (FDI) in the country. This was revealed by the Annual Report 2020 released by the Pakistan Telecommunication Authority (PTA) on Thursday.


Mobile Phones Imports Witnessed An Increase of 52.37% in First Half FY2021

The sector’s contribution to the national exchequer also increased by 129 percent (Rs. 278.4 billion), owing to deposits of $687.8 million by Cellular Mobile Operators (CMOs) under license and spectrum renewal fee and a substantial increase in General Sales Tax (GST) and Withholding Tax (WHT), which remained suspended last year on the directions of the Honorable Supreme Court of Pakistan.

The International Telecommunication Union (ITU) ranked PTA as 4th Generation Regulator (G4), thus placing Pakistan among the top five regulators in the Asia-Pacific region and the only G4 regulator in South Asia. This recognition is a testimony to the rapid evolution of ICT regulations in Pakistan, and a move towards collaborative regulations.

PTA also bagged the distinction of implementing the world’s first open-source, full-fledged Device Identification, Registration, and Blocking System (DIRBS), and the same has internationally been recognized by ITU as a flagship project. Launched in collaboration with the Federal Board of Revenue (FBR), DIRBS had a positive impact on the economy in terms of an exponential increase of 62.7 percent in the legal import of mobile devices from 17.2 million in 2018 to 28 million in 2019.


Telecom Sector Contributed Rs. 278 Billion to National Exchequer in 2020: PTA Annual Report

Taxes and duties collected from individual consumers, which was an untapped area for revenue collection before DIRBS, has resulted in the collection of Rs. 7.7 billion during the period between January 2019 and September 2020.

Furthermore, the successful implementation of DIRBS has also facilitated exploration of the opportunity for local manufacturing of mobile handsets. The provision of a level playing field has resulted in the establishment of more than 29 local assembly plants and the production of over 18.36 million local mobile handsets since 2019.

Through collaborative regulations, PTA is also facilitating the regulatory framework for local manufacturing in coordination with the Ministry of Industries and Production.

PTA renewed the cellular mobile licenses of Telenor Pakistan, Pakistan Mobile Communications Limited (PMCL; Jazz), and China Mobile Pakistan (CMPak; Zong) to ensure continuous provision of mobile services.

These companies have deposited a 50 percent renewal fee ($687.8 million; equivalent to Rs. 107.6 billion) in the national exchequer while the remaining 50 percent of the amount is payable in five equal annual installments. Telenor, Zong, and Jazz have paid their first installment of the remaining 50 percent, amounting to $174.4 million.

The total telecom taxes (excluding PTA deposits) grew by 43 percent and stood at Rs. 137 billion. Major operators, CMOs, and PTCL contributed Rs. 134 billion (over 97.6 percent) to total taxes, while small operators contributed the remaining.

In addition to the aforementioned taxes and contributions made by the telecom sector, the FBR also collects a huge amount against the import of cellular mobile handsets, which allows only registered and tax-paid handsets to connect to telecom networks in Pakistan.

COVID-19 Impact on Growth of Pakistan’s Telecom Sector

The downward trend ever since the pandemic hit Pakistan in March 2020 witnessed total revenues of CMOs by April-June 2020 reaching Rs. 101 billion — 5.6 percent lower as compared to the previous quarter, and about 9.6 percent lower compared to the same period last year. To mitigate revenue loss, operators may reduce the costs and further modernize the system.

The International Telecommunication Union (ITU) – the United Nations specialized agency for information and communication technologies – reported a general decline of 5 to 10 percent in telecom sector revenue across countries owing to COVID-19.

Pakistan was no exception; in FY2020, telecom sector revenue declined to Rs. 537 billion, which was 2.4 percent less as compared to last year.

The cellular mobile sector registered a decline of 4.8 percent in its revenue (from Rs. 445 billion in 2019 to Rs. 424 billion in 2020). The COVID-19 pandemic, coupled with revenue pressure, impacted the profitability of major operators.

A major setback was endured by Zong, which had been earning positive profits during the last two years but reported a negative profit (loss) of Rs. 3.6 billion in FY2020 as against a positive profit of Rs. 12.9 billion for the same period last year. Telenor and Jazz continued to earn positive profits of Rs. 4.1 billion and Rs. 36.8 billion, respectively, in FY 2020 though profits declined by 79 percent and 7 percent, respectively, compared to the previous year.

In Pakistan, the cellular mobile industry’s Average Revenue Per User (ARPU) per month (Voice+Data) stood at Rs. 214 in FY2020, indicating a decline of 10 percent as compared to the preceding year.


Telecom Sector Contributed Over Rs 173 Billion as Taxes This Year

The industry data ARPU stood at Rs. 240.5 in FY2020 as against Rs. 262.3 during FY2019. The drop in ARPUs can be attributed to significant price reductions introduced by operators during COVID-19 and a rapid increase in subscriptions against revenue.

Although the 10 percent decline in total ARPU occurred because consumers shifted away from traditional voice services, the 8 percent decline in data ARPU can only be justified with a reduction in prices as data usage increased by 77 percent.

Other Indicators as Shown by PTA Annual Report

According to the annual statistics, the report showed that Broadband subscriptions grew by 17 percent during the fiscal year 2019-2020 (FY2020), crossing the 90.1 million in October 2020 mark, whereas 4G subscriptions registered an exponential 60 percent growth in FY2020.

Resultantly, total broadband penetration in Pakistan reached 42.4 percent by the end of October 2020. With the expansion of 3G and 4G services, FY2020 also marked an increase of 77 percent in data usage.

Where historic lockdowns during the COVID-19 pandemic slackened economic activity, vibrant telecommunication systems played a pivotal role in ensuring the availability of essential services to the community, said the report.

In a way, the pandemic actualized the true potential of broadband services, transforming the way people lived their lives. All daily activities related to education, health, and virtually all other sectors of the economy were shifted to digital dimensions, creating a huge nationwide demand for telecom services.