ISLAMABAD: Pakistan’s telecom sector is confronted with the challenges of profit repatriation and high spectrum costs that are forcing businesses to re-evaluate their position in the market.
Talking to Media, Saad Muzaffar, chief executive officer of Transworld Associates (TWA), a submarine fiber optic network provider, highlighted that the challenges of profit repatriation and the growing cost of spectrum licensing were the two most pressing problems jeopardising the sector’s overall stability as they’re not only impeding growth but also triggering market exits.
He explained that the depreciation of the Pakistani rupee, which reduces the value of profits when exchanged with other currencies, made the problem worse. “Telecommunications companies are finding the country less appealing to engage with due to the risks associated with capital flight and currency devaluation. Apart from the difficulties associated with profit repatriation, telecom companies are also greatly concerned about the exorbitant cost of spectrum licenses. Periodically, the government has put spectrum bands up for auction with prices that industry participants often view as excessive,” he explained.
Muzaffar pointed out that due to the high prices, telecom companies were compelled to spend a large amount of their budgets on spectrum acquisition rather than network development or service enhancement. “As a result, they are less able to provide competitive services and invest in cutting-edge technologies like 5G, which are essential for their further growth.”
Talking to Media, Mahnoor Arshad, a research associate at the Sustainable Development Policy Institute (SDPI), said that repatriation of profits was one of the biggest obstacles that the telecommunication companies had to deal with. “The country’s stringent foreign exchange laws make it increasingly difficult for companies to send their profits back to their home countries.”
She pointed out that the burden of these costs was not limited to initial spectrum purchases. “Telecom companies also face recurring expenses related to spectrum fees, taxes, and regulatory compliance. “The cumulative effect of these pressures is making it increasingly difficult for telecom operators to sustain their operations profitably, prompting some to consider exiting the market.”
Mahnoor highlighted that the ramifications of telecom providers pulling out of the market were significant. “A decline in the number of participants may result in less competition, which can push up costs and degrade customer service.”
“Moreover, it would discourage companies from investing in cutting-edge services and new infrastructure, which would slow down the country’s technological progress. This would be particularly detrimental for Pakistan’s broader digital economy, which relies heavily on a robust and competitive telecom sector to drive growth and innovation,” she said.
Mahnoor lamented that the situation was further complicated by the broader economic challenges. “The country’s macroeconomic instability, characterised by high inflation, low foreign exchange reserves, and a large fiscal deficit, creates an environment of uncertainty that makes long-term investments in the telecom sector particularly risky.”
“Policy changes that increase the telecom sector’s appeal to both current and new investors are desperately needed to address these issues. To make sure that its spectrum pricing plan is in line with the market’s financial realities, the government ought to think about updating it,” the SDPI research associate stressed. –INP
