Telecom industry in Pakistan is experiencing a slowdown at a time when the country needs to accelerate broadband adoption due to hindrances including tax regime, regulatory effectiveness, and Right of Way (RoW).
Telecom sector can play a vital role in increasing primary education & literacy rate, in Foreign Direct Investment, tax to GDP ratio, annual exports, higher education rates, reduction in poverty, increase internet penetration, improve gender equality, improve global competitiveness ranking and improve ease of doing business and other. It fetched around $15 billion of investment since 2004, besides creating 14,000 direct and thousands of indirect jobs, according to the official data. However, according to telecom experts, the jobs creation ratio is not increasing with the pace witnessed in the past.
The Need for a Proactive Approach Vital for Telecom Growth
Telecom investment stood at $670.3 million during 2017-18 compared to $644.5 million in 2016-17, registering an increase of $25.8 million. Telecom investment stood at $1.815 billion in 2013-14, $1.005 billion in 2014-15, $730.9 million in 2015-16, $644.5 million in 2016-17 and $670.3 million in 2017-18. Despite that, Telecom contribution to the national exchequer was Rs 243.88 billion in 2013-14, Rs 126.26 billion in 2014-15, Rs 160.17 billion in 2015-16 and Rs 161.43 billion in 2016-17 which further declined to Rs 147.23 billion in 2017-18.
There is the number of issues that have slowed down telecom growth. According to officials, irrational tax rates (previously on consumption, now handsets too), increase in duties and taxes, increasingly costly compliance (5 revenue authorities with competing interests) are hindering telecom sector growth. Smartphone affordability is also a huge barrier. A $100 smartphone becomes Rs 20,000 by paying Mobile Levy, Regulatory Duty, Customs Duty, Sales Tax, Additional Sales tax, and income tax.
Right of Way (RoW) is another major impediment in the spread of broadband. Mobile Operators cannot expand in many cases and is the single biggest barrier against fiberisation. Owners of RoWs – NHA, Railways, DHAs, Cantt & Municipal Authorities, etc. maximize their earnings by imposing arbitrary fees. They ignore statutory provisions that a fee has to be cost-based. Another barrier is the regulatory ineffectiveness and delay in policy frameworks. Around 25 frameworks were promised in 2015 Telecom Policy but none introduced so far.
Experts recommend long-term spectrum plan with specific timetables, the release of the spectrum as per timelines and terms, decrease in smartphone tax to encourage wireless broadband, the continuation of technology neutrality regime, implementation of asset sharing, consultation on frameworks and regulations and implementation of spectrum sharing and trading regimes for the revival of telecom sector growth.