Three major telecom operators of the country have reached out to the State Bank of Pakistan (SBP) for the reversal of the recently imposed 100 per cent cash margin requirement for the import of telecom-related equipment that these companies usually buy from abroad.
Jazz, Telenor and Ufone said in a letter to the Banking Policy and Regulations Department of the central bank, that the requirement that became effective on April 7 is “extremely detrimental” to the industry.
Jazz, Telenor and Ufone Demand Reversal of 100pc Cash Margin Requirement for Imports
“Nearly 85-90pc of telecom imported equipment now falls under this new circular and, therefore, it will have a severely adverse impact on the liquidity situation as well as the funding requirements for telecom companies,” the three firms said in their joint correspondence to the SBP.
The telecom sector depends heavily on imports for its equipment like power equipment, lithium batteries, routers, mobile phones, main telecom equipment, telecom parts, hard disks and servers.
“With the sudden and immediate change in regulatory requirements, the cash outflow that was supposed to happen on a future date has to be made immediately (upfront to banks as cash margin) which has a direct impact on the liquidity and financial health of the companies,” it said.
The letter also contains that these companies also threatened to either reduce their network expansion plans or obtain new financing from banks.
If the companies follow the order of SBP, it will put a direct impact on the telecom capital expenditure rollout plans for the year. Moreover, it will also affect the network capacity enhancements to increase services penetration and modernisation as well as the upgrade of base transceiver station sites from 2G to 3G/4G technology.