Why Telenor Decided to Leave Pakistan?

Telenor’s imminent pullout from the Pakistani market comes after more than a year of expressing its desire to do so. Sigve Brekke, the company’s president and CEO, stated a year ago that a strategic review of alternatives for its operations in Pakistan was on the horizon, citing worries about the deteriorating socioeconomic environment and expressing the need for a write-down.

Financial Challenges Leading to Telenor’s Exit

Telenor’s decision to leave Pakistan was influenced by several issues, the most significant of which were poor financial outcomes. Following a $244 million impairment on operations due to worsening economic conditions, the business launched a strategic review of its Pakistan unit in July 2022.  Subsequently, Telenor also reported a decline in underlying earnings in Pakistan in October 2022, which was partially due to rising energy prices.

Persistent Troubles and Industry Dynamics

Telenor’s troubles in Pakistan have been persistent, with the industry’s average revenue per user (ARPU) being less than a dollar. A former employee highlighted the pressure on Telenor’s ARPU, exacerbated by a strategy targeting a low-income rural population, complicating conditions for the telecom.

Furthermore, the $395 million investment in 2014 to acquire the 850 MHz spectrum did not deliver the expected result either as the frequency was supported by relatively expensive handsets that were outside the affordability of the telco’s primary customer base.

Broader Industry Challenges and External Factors

In addition to these internal problems, a broader problem also surfaced, affecting all operators was the ‘dollarized’ costs of renewing licenses and spectrum pricing. While revenues are generated in Pakistani rupees, all other expenditures, including government license fees and imported equipment, are paid in dollars, drastically decreasing profits. Last year’s severe floods harmed communication infrastructure and operating capacities, contributing to Telenor’s customer base decline.

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