Telecom operations pull out FDI from Pakistan

STAFF REPORT IBD: The telecom sector witnessed an outflow of $253.3 million Foreign Direct Investment (FDI) in eight months of the current financial year 2011-12 as a result of closure and curtailment of their businesses and operations in Pakistan.
“The de-investment in the telecom sector, one of the leading contributors of FDI in Pakistan, was recorded 364 per cent in Jul-Feb compared with FDI landing $96 million in the corresponding period of the previous financial year,” State Bank of Pakistans statistics reveal.
Different telephony service providers including GSM, LDI, Wireless, Car Tracking Services have limited their businesses because of tough competition environment and high operational cost whereas few of the companies have wrapped up their business after the Pakistan Telecommunication Authority (PTA) suspended their licences on different grounds.
Another prominent factor that led to a drop in share of the sector was the stuck up privatization proceeding of $800 million payment by Etisalat due to a dispute with the government of Pakistan over legal transfer of land and property titles.
Besides, the growing competition and entrance of three foreign cellular companies during 2005-09, the profits started to squeeze and ARPU/month declined from $3.2 in 2007 toS$2.4 in 2009 onwards.
The telecom was one of the most attractive sectors for foreign investors from 2005 to 2008. Its share in total FDI started to rise gradually and reached 45 percent in financial year 2006-07.

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