ISLAMABAD: According to the latest State of Pakistan’s Economy report released by the State Bank of Pakistan, the country’s telecom sector has an average revenue per user (ARPU) of $0.80 per month, in stark contrast to the global average of over $8. The ARPU is a key metric to gauge the financial health of cellular mobile operators.
It is important to note that even amongst the neighbouring countries, the Pakistani telecom sector is operating at less than half the revenue, with monthly ARPU figures for India and Bangladesh at $1.7 and $1.6 respectively. The telecom sector, as per the report, is grappling with challenges such as high corporate taxation, which is impacting their earning prospects.
Meanwhile, a sector-wise analysis reveals a significant drop in profit repatriation for telecom companies during the financial year 2023. Repatriation is the ability of a firm to send profits to its home country. This decline in repatriation, the report suggests, can be attributed to foreign exchange constraints and a decrease in profits for some corporations due to a slowdown in the domestic economy.
As the telecom sector’s cost structure is dollarized in terms of spectrum fee, capex, fuel, electricity, etc, the companies also face a massive blow with the depreciation of local currency.
Furthermore, a breakdown of loans obtained by the private sector during the financial year 2023 indicates that telecom is among the highest borrowers, with a total loan of PKR 63.2 billion, and the highest fixed investment among all sectors, amounting to PKR 48.3 billion.
Commenting on the statistics, CEO of Jazz, Aamir Ibrahim, stated in a tweet that the telecom sector has been facing pressing challenges for a couple of years now. He emphasized that, due to its capital-intensive nature, the telecom sector is among the highest borrowers to meet its substantial investment requirements, especially amid record-high interest rates.
Pointing to factors such as the lowest global average revenue per user, a high taxation environment, an unprecedented increase in business costs, particularly the soaring dollar-pegged spectrum prices, and the Rupee depreciation over the years, he noted that investment appetite is rapidly diminishing. This poses a challenge to ensure consistent improvement in the quality of services. He called for swift implementation of long overdue policy interventions to enable the telecom sector to continue powering the digital Pakistan dream.
Earlier this month, The Pakistan Telecommunication Company Limited (PTCL) Group also reported a net loss of PKR 9.28 billion during Q3 FY23, higher than the net loss of PKR 5.62 billion during the same period last year. Finance costs for the period also increased to PKR 12.02 billion from PKR 9.34 billion during the same period last year. The company further noted that the business environment in 2023 remains affected by the unfavorable macroeconomic challenges that emerged in 2022. Increasing energy and fuel costs persist as hurdles for telecom companies, making it challenging to offer top-notch services to consumers at reasonable rates.
Similarly, Telenor Group’s Head of Asia, Borre Furberg, during a recent meeting with Federal IT and Telecom Secretary Hassan Nasir Jamy, said that the business and investment environment in the telecom sector has been challenging for some time, calling for urgent policy reforms.
The real problem lies elsewhere. When there is inefficiency, poor services, cronyism, favouritism and the like, you cannot expect telecom sector to perform in the green. I can just quote the example of PTCL. It has different plans and priority, subsidised services for its employees, different from the ordinary consumers. PIA, WAPDA, SGNGL, Railways all are in the same league because of free rides for some. Unfortunately this aspect has never been duly highlighted.