Following a sharp decline in the exchange rate, Pakistan’s average revenue per user (ARPU) fell to $0.80, placing telecom operators in a dire financial situation.
The telecom companies have requested a one-year moratorium on quality of service (QoS), rollout obligations, and payment of the Universal Service Fund (USF) and Ignite Fund reduction from 2 to 1 percent from the regulator, the Pakistan Telecommunication Authority (PTA).
In light of the current situation, there has been a significant decline in service quality across much of the nation. The results for voice service quality are particularly poor due to a variety of factors, such as load shedding and financial constraints.
In order to maximise the base price, the cellular mobile operators have also demanded voice and data floor price uplift mechanisms.
The telecom companies’ demands include (i) moratorium on quality of service (QoS), (ii) a suspension of rollout commitments, (iii) a reduction in the annual contributions made by the telecom sector to the Universal Service Fund (USF) and R&D Fund (Ignite), and (iv) a voice and data floor price uplift mechanism to optimise base price.
Top official sources told media on Tuesday that the telecom companies have also demanded that the Advance Income Tax (AIT) be reduced from 15 to 10 percent. According to estimates, the exchequer will lose Rs5.2 billion for every percent reduction in AIT. The cost of a 2% tax reduction is Rs10.4 billion.
The telecom operators have requested a moratorium on quality of service from the government and the PTA. The PTA was tasked with assessing the level of service and had the authority to sanction the operators for non-compliance.
According to the official, CMO representatives had complained to the government that Letters of Credit (LCs) were not opening promptly and that they were being forced to import only the utmost necessities. Therefore, there should be a moratorium on service quality.
The same situation applies to roll-out obligations; as per licence requirements, telecom operators must increase their roll-out by 3% across the nation. The operators struggled to find all of the necessary equipment due to the import restrictions and mainly imported only what they thought was essential to keep their operations running smoothly.
The telecom operators have also called for a one-year moratorium on the reduction of USF and R&D funds from 2 to 1 percent.
The Ministry of IT contacted the Finance Division and requested the release of Rs 57 billion in funds that were being used as federal consolidated funds, but the financial issues persisted. Out of the total amount of Rs57 billion that was stuck, the Ministry of Finance flatly refused to accede to the demand and even refused to release Rs6 billion in funds.
Following a sharp decline in the exchange rate, Pakistan’s average revenue per user (ARPU) fell to $0.80, placing telecom operators in a dire financial situation.
Aamir Hafeez Ibrahim, the CEO of Jazz Pakistan, recently tweeted that the dollarization of the telecom sector’s cost structure means that Pakistan’s telecom industry can only survive if it remains above $1 (for spectrum fees, capex, and fuel). “We can no longer afford to limit tariff increases through regulation,” he said.