ISLAMABAD: Declaring a “digital emergency”, Pakistan’s telecom sector shared a doomsday scenario and argued that its net profit would turn into a deficit by the end of the current calendar year 2022.

The telecommunications sector would fall from a net profit of $188 million in 2021 to a deficit of $287 million by the end of calendar years 2022 and 2023 due to the deterioration of the economy.

Even the biggest player has faced a cash crunch of Rs 40 billion to repay its accrued obligations as a result of rising taxes, interest rates and operational costs, the free fall of the rupee, payment of license fees in dollars and inconsistent policies. And this despite an investment of more than 10 billion dollars in Pakistan. “We have gone through severe challenges and now it is a matter of survival. The regulator does not allow the telecom sector to increase its tariffs. The average revenue per user (ARPU) has dropped significantly and Pakistan has become the most In such a scenario, the telecommunications sector is heading towards a doomsday scenario, and our foreign owners will not allow debt to be incurred to pay their obligations and their shareholders,” two senior industry officials told a select group of journalists during a press briefing on Thursday evening.

They were of the view that connectivity has become the most important reality in our lives as banks, NADRA, immigration, hospitals, educational institutions and many other departments need connectivity to lead to their life well. It was therefore necessary to determine whether telecommunications services were a luxury or a critical sector for our lives.

On the rapidly deteriorating financial health of the telecommunications sector, they argued that of the total revenue earned, almost 74% was consumed by costs. So, after having met all the obligations in all respects, the sector is heading towards a point of saturation. The total revenue of the telecommunications sector, in rupees and dollars, has been declining instead of reaching normal growth, with total revenues amounting to 548 billion rupees in 2016, which is now at 644 billion rupees. This year, revenue is expected to decline in rupees as well as dollars, they added.

They lamented that despite earning income in rupees, they had to pay spectrum fees or renewal fees in dollars. Pakistan ranks 233rd out of a total of 238 countries in ARPU according to the GSMA report. They called for a stimulus, permission to increase rates, tax cuts, fixed-exchange dollar repayment obligations, a NEPRA industrial electricity tariff, and other measures. These measures would boost the sector’s revenue up to 1.2 trillion rupees until 2025.

Better regulation was needed for the sector instead of strangulation tactics, such as the PTA’s restrictions on raising rates. They said there was a perception that the telecom sector was making high profits, but after 2016 the sector went on a downward trajectory. Currently, there are four players in the telecommunications sector, but given the relationship between existing revenues and costs, there would be mergers or closures written on the wall. They also recommended that the government stagger the repayment period from 5 to 10 years after fixing the exchange rate on existing players, as it would not be possible for them to get more loans to pay off existing debts.

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