Telecom services for 76 % of the population by September end

ISLAMABAD ( MEDIA )

Shy of any major developments, the telecom sector has muddled along for quite some time now. The year 2012-13 was not different, as latest statistics released by Pakistan Telecommunication Authority (PTA) suggest a mixed affair.

According to PTAs annual report, cellular connectivity remains the primary driver of coverage, revenues and taxes. Operators have expanded to over 90 percent of the geographical landscape and are offering telecom services (fixed line, wireless and mobile telephony) to nearly 76 percent of the population by September end.

There is a bunch of good and bad news. The good news is that falling subscriptions for fixed line and wireless telephony are seeing a revival of sorts. In addition, cellular subscriptions grew by over 7 percent, in a highly saturated market, to reach 129 million in the year ending June 2013. Reportedly, telecom revenues surged by nearly 9 percent year on year to Rs445.7 billion in FY13.

But the fruits being reaped are a consequence of large investments made in earlier years, particularly between 2004 and 2008. There have been no major investments in recent years, mostly due to stalled spectrum auctions and a presumed ban on issuance of new licenses till 2013 (related to governments acquiescence to Etisalats conditions for the $800 million pending dues from PTCL privatisation).

A total of $472 million (nearly twice the previous year) was reportedly invested in local telecom sector in FY13, most likely to feed the up-gradation projects in cellular and fixed line networks. But, it pales in comparison to $3.13 billion invested in FY08, because foreign sponsors don see any new network technology to invest in.

In fact, the sector is recording massive outflows. The SBP data show that the telecom sectors continuing net FDI outflow increased in FY13 when $408.1 million left Pakistani shores.

Government inaction on the telecom front also hurt the sectors tax contribution and regulatory fees, which went down by 6.5 percent year on year to fetch Rs124.7 billion in FY13. One of the factors that explain this drawdown is the decline in PTAs revenues, which may reverse in the future on license renewals. Sectors contributions could have been higher without the embargo on issuing new licenses.

Interestingly, there was just 0.6 percent yearly growth in GST (collected on airtime and related services usage), which is at odds with the 9 percent rise in operator revenues. This possibly points towards a plausible inference that exorbitantly high taxes (both GST and WHT) and additional surcharges (operators fee-based revenue) are pushing cellular users to cut back on their “consumption”.

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