Telcos Propose 5G-Friendly Tax Breaks in Budget 2023-24

Telecom operators have proposed the government adopt a model to earn with 5G development instead of spectrum fee and taxes, as return on investments will be a severe issue with the 5G launch in Pakistan due to high Capex and Opex requirements.

Official documents available with ProPakistani revealed that telecom operators have proposed tax breaks in spectrum fees and local handset manufacturing applications. Further, one-window operations for Right of Way (ROW) decisions are becoming inevitable in Pakistan, they added.

“Pakistan launched 3G and 4G with very mature systems in 2014. We can move in the 5G direction certainly but the government of Pakistan/Ministry of Information Technology and Telecommunication (MOITT) should incentivize to make this transition a success,” operators added.

5G has arrived internationally including in South Asia and soon will be launching in Pakistan. The issue was also raised in the South Asian Telecommunication Regulators’ Council (SATRC) Workshop on Policy, Regulation, and Services (PRS) held in Pakistan.

A telecom operator representative while giving a presentation stated that one of the key steps of this SATRC body must be spectrum harmonization. This is critical to avoid issues/conflicts like those happening in Gulf.

Sub-committee on spectrum harmonization is key as the propagation of radio waves is not bound to geographical boundaries. Ideally and practically, regulatory and technical rules must be the same for all countries under SATRC like synchronization techniques, frame, sub-frame sub-configuration as well as starting and ending frequencies of bands and in addition, vacant bands and why these bands are vacant.

The SATRC member countries have already either auctioned the 5G spectrum or shortlisted the bands for it. Bangladesh and India have auctioned the 5G spectrum but using it for 4G technology. Maldives and Iran are having very limited coverage of 5G. Nepal and Sri Lanka are in a trial phase.

Telecom operators had earlier demanded 5G with a free spectrum for five years and zero taxes on the import of equipment and 5G handsets/devices for the launch of services in the country.

Official sources revealed that the government is considering several proposals to launch 5G at least in major cities of the country. The previous government had planned to auction the 5G spectrum latest by end-March 2023 in the country with the initial launch in big cities. However, due to political instability in the country, it was not made possible, official sources added.

The industry stakeholders as well as senior government officials are terming it next to impossible while some are of the view that 5G launch is difficult even by the end of December 2023, keeping in mind the economic situation in the country in general and the telecom market in particular.

Telecom operators had submitted some recommendations to the government for the launch of 5G services in the country.

Operators demanded the introduction of innovative, radically different, and implementable 5G policy with the following to be considered:

1. free spectrum for the first five years with zero taxes on the import of equipment and 5G handsets/device,
2. any proposal of an auction should be after five years, once the use cases have developed and
3. policy intervention required to ban 2G/3G handset local production as well as import.

The Pakistan Telecommunication Authority (PTA) while responding to telecom operators’ demands stated that the government of Pakistan will issue a policy directive for the launch of 5G in the country.

The Authority has also strung several challenges and impediments including low handset and optic fiber cable (OFC) penetration, increasing inflation, low average revenue per user (ARPU), and rising operating expenses (OPEX) coupled with high taxation to launch 5G services in the country.

To begin with, 5G handset penetration in the Pakistani market is a major impediment; the percentage of 5G-supported handsets in the country is less than one percent. While many developed countries have deployed 5G technology, Pakistan is beset with challenges in offering the said services, said the Authority.

Further low OFC penetration, fewer potential use cases, lower tower density, increasing inflation, low ARPU, and rising OPEX such as an increase in fuel and electricity prices, coupled with high taxation are some of the key factors that can potentially impact 5G launch.

International projections suggest that by the end of 2026, 5G will attract 3.5 billion subscriptions, thereby generating approximately 45 percent of the world’s total mobile traffic data.

The Authority further stated that the introduction of 5G is extremely important for Pakistan to keep pace with regional developments. Despite challenges, which need to be addressed before a comprehensive 5G policy is issued by the government.