Telenor may not participate in Pakistan’s 3G License Auction
The chief of the second-largest cellular services company in Pakistan has said his group will reconsider its decision to participate in the auction for 3G spectrum licences and for investing in the country in the future.[blockquote cite=”Lars Chirstian Luel, the CEO of Telenor”] Mobile service providers “are not money-making machines. I understand that the tax base has to increase, but we would rather see an expanded tax base rather than the greatening burdening of industry and individuals who are already taxed.
He was speaking in context of the government’s decision to impose 5% more withholding tax on cellular services and the government’s decision to increase estimated collection from the auction of 3G spectrums to $1.2 billion from $800 million.
In the budget for this fiscal year, the federal government has increased the withholding tax rate from 10% to 15%. This is in addition to the 19.5% federal excise duty that customers pay.[blockquote cite=”Luel”] Taxes in Pakistan are already three times higher than in neighboring countries like India and it is reckless to impose these taxes on the common man in the street, while those who have the ability to pay are not taxed. The move will pressure the company’s revenues, as customers’ ability to spend has more or less reached its limit.[/blockquote]
The value of the 3G licence is decreasing as more taxes and regulations are imposed, he added that Telenor has pulled out from bidding in other countries due to the high price of the auction.
He said he has made it clear to both the information technology minister and the minster for finance that the new government either has to take away some new regulatory requirements or reduce taxes, as both measures combined have made new investment less and less attractive.
The complaints of Lars Chirstian Luel were:
- The new government had “taken” the USF away from the telecom industry, in contravention to the Telecom Act. The industry is paying 1.5% of its yearly revenues in USF, which is supposed to be used to build infrastructure in remote areas, so the government should now reduce tax rates in return for using the industry’s funds.
- Regulations like issuing only five SIM cards against one Computerized National Identity Card have limited the prospects for business expansion.
- Banning late night packages was an area in which the government should not interfere.
- The suspension of services due to terrorism threats was also causing huge revenue losses.