Mudassar Hussain, VP of Public Policy & Regulatory Affairs at Jazz, said that Pakistan’s telecom sector is currently going through its toughest times as a result of an exponential rise in the cost of doing business, with constantly rising USD spectrum pegged instalments being one of the key contributing factors. He was speaking at Pakistan Telecommunication Authority’s Consumer Conference 2022.
He noted that because it had not been addressed in prior spectrum auction rules and licence renewals, the government’s decision to link the spectrum price to the US dollar rather than the rupee was an urgent issue for local cellular mobile operators and the sector’s financial health. The country is currently experiencing a digital emergency due to the unsustainable condition.
“Customers are charged in rupees for cellular mobile operations. Revenue is also made in rupees, which are re-invested by operators to cover the majority of expenditures, such as spectrum prices and equipment imports in dollars. Denominating spectrum costs in dollars exposes operators to significant currency depreciation risk.”, he stated.
Similar to how annual instalment payments for spectrum licences became increasingly erratic over time. This makes it more difficult for operators to plan for upcoming network, service, and spectrum investments.
He continued by saying that the ongoing devaluation of the rupee had made the cost of renewing licences and spectrum for mobile operators already prohibitive, and that industry players were in a difficult situation given the country’s dire economic situation because both spectrum prices in USD had increased concurrently with the PKR devaluation.
When seen as a whole bundle of frequencies under a licence, the price of spectrum has increased dramatically over the years even though the increase in price for individual frequency bands may not have been significant in cash terms over the years. Take into account the USD 450 million renewal cost for the USD 291 million licences granted to Telenor, Warid, and Zong in 2004.
Furthermore, there has been a significant gain in rupee terms as a result of the local currency’s devaluation. For instance, the price of a 1 MHz spectrum in the 1800 band increased by 388% between 2007 and 2022, from US$ 21 million to US$ 31 million (or 1.27 billion to 6.65 billion rupees).
He claimed that the industry asked for immediate policy intervention as part of the emergency stimulus package, such as spreading licence payments over ten annual instalments rather than five and denominating spectrum payments in rupees, which would give the operators much-needed fiscal breathing room and enable them to continue providing services to more than 195 million subscribers.
In addition, he acknowledged how the telecom sector works with the Pakistan Telecommunication Authority and the Ministry of Information Technology and Telecom to address existing issues, guarantee service quality improvement through time, and advance Pakistan’s objectives for digital inclusion.
