Pakistan’s telecom sector is currently undergoing its toughest times due to exponential increase in the cost of doing business, constantly increasing USD spectrum pegged instalments being one of the key contributing factors, said Mudassar Hussain, VP, Public Policy & Regulatory Affairs, Jazz at Pakistan Telecommunication Authority’s Consumer Conference 2022.
The government’s decision to link the spectrum price to the U.S. dollar instead of the rupee, he said, was a pressing concern for local cellular mobile operators and the financial health of the sector, as it had remained unaddressed in all spectrum auction policies and license renewals. The untenable scenario has now pushed the country into a digital emergency.
In case of cellular mobile operations, the customers are charged in rupees. The revenue is also earned in rupees, which is then re-invested by the operators to pay for most of the costs including spectrum price and equipment imports denominated in dollars. Denominating spectrum costs in dollar exposes the operators to huge currency devaluation risk.
Likewise, annual spectrum licence instalment payments become unpredictably expensive by each passing year. This limits operators’ ability to plan for network, service and even further spectrum investments.
He further said that the ongoing rupee devaluation had further affected an already exorbitant license/spectrum renewal price for mobile operators and the industry players were facing a double jeopardy in such harsh economic conditions prevailing in the country where both spectrum price in USD had escalated coupled with the devaluation in PKR.
While in dollar terms the increase in spectrum price for individual frequency bands, may not seem substantial over the years however when seen in overall package of frequencies in a license, the prices have considerably escalated even in USD terms. Case in point is the 2019 renewal price of ~USD 450 million for USD 291 million licenses issued in 2004 to Telenor, Warid and Zong.
Mudassar Hussain, VP Public Policy @jazzpk presenting on behalf of telecom sector at @PTAofficialpk Consumer Conference 2022. Unprecedented rise in cost of operations threatening telecom industry's survival. Financial health of sector critical to ensure quality of services. pic.twitter.com/9HsrJjiSDK
— Khayyam Siddiqi (@mkhayyams) August 25, 2022
Further to this there has been an additional massive surge in rupee terms due to local currency devaluation. For instance, the cost of 1 MHz of spectrum in 1800 band increased from US$ 21 million to US$31 million between 2007 to 2022, it translates into an increase of 388% in rupee terms from 1.27 billion to 6.65 billion.
He said that as a part of the proposed emergency stimulus package, the industry sought urgent policy intervention such as staggering of license payments over 10 annual instalments rather than five, and denominating spectrum payments in rupees which would provide critically-needed fiscal space to the operators and enable them to continue to serve over 195 million subscribers.
During his talk, he also acknowledged telecom industry’s partnership with the Pakistan Telecommunication Authority and the Ministry of Information Technology & Telecom to help mitigate the current challenges and to ensure consistent improvement in quality of services and support Pakistan’s digital inclusion objectives.
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