Low FDI in Telecom Sector Hampers 5G Rollout and Growth in Pakistan

The decline in Foreign Direct Investment (FDI) and overall telecom sector investment poses significant challenges to Pakistan’s 5G rollout and the sector’s growth. According to the Pakistan Telecommunication Authority (PTA) annual report, FDI in the telecom sector fell to $46 million in 2023-24 compared to $58 million in 2022-23, marking a continued downward trend from $204 million in 2020-21.

Simultaneously, the telecom sector investments also dropped to $765 million in 2023-24 from $770 million the previous year. As per the official stats, the investments stood at $1.657 billion in 2021-22. The telecom regulator PTA has attributed the decline to Pakistan’s challenging economic conditions, which have negatively impacted investor confidence and hindered capital inflow.

The PTA report highlights that substantial investments are required for the 5G rollout in the country. However, slow returns on investment, high infrastructure costs, and the availability of 5G handsets remain key hurdles. The road to 5G includes upgrading networks, deploying small cells, and improving fiber optic backhaul, all of which require significant financial resources. The telecom operators are also reluctant to commit to large upfront expenditures. as they are already operating in a competitive and price-sensitive market.

Member Finance PTA, Muhammad Naveed, linked the country’s economic stability to the decline in FDI and investment. He underlined the need for government incentives and public-private partnerships (PPPs) to ease the financial burden on telcos and encourage investments vital for the 5G ecosystem.

Despite these challenges, telecom revenues reached a staggering Rs955 billion in 2023-24. The sector contributed Rs335 billion to the national exchequer, though slightly lower than the Rs341 billion in 2022-23. Moreover, the Mobile Average Revenue per User (ARPU) also witnessed improvement, rising to Rs276 per month from Rs229.

The lack of substantial FDI is especially concerning as countries like India, China, and even Bangladesh are reportedly making rapid advancements in their 5G infrastructure. India alone attracted billions in FDI for its 5G rollout, strengthening its telecom sector and enhancing digital growth. In comparison, Pakistan risks falling further behind in the global digital race without strategic policy shifts and enhanced investor confidence.

PTA also emphasized that bridging the urban-rural digital divide is essential for equitable 5G adoption. This is because the high deployment costs and logistical hurdles in remote areas may leave rural regions lagging behind. Data from GSMA further indicates that rural populations are the most underserved, with low smartphone penetration exacerbating the gap.

Also read:

https://www.phoneworld.com.pk/5g-in-pakistan-all-you-need-to-know/