Amir Saeed

Telecom companies face serious financial challenges due to the rising expense of spectrum licences ­­- priced in US dollars - posing a serious threat to their financial stability and expansion plans. Talking to WealthPK, Aamir Ibrahim, Chairman of the Telecom Operators’ Association, highlighted that owing to the current economic challenges, telecom companies were finding it difficult to raise capital. “This situation forces us to divert resources from other critical areas such as network expansion and quality improvements, directly impacting the quality of service offered to consumers.” “One of the main issues facing the telecom sector is that the companies’ cash flow is being negatively impacted by high spectrum prices. Their foreign currency reserves are further squeezed by the requirement to make large upfront payments,” he pointed out. Aamir said the financial strain from high spectrum prices increased firms’ borrowing costs. “Operators have to take expensive loans to pay for the spectrum licences.” “High spectrum charges also threaten the affordability of telecom services for consumers.

The high cost of spectrum has to be transferred to customers in the form of increased rates and smaller data packages,” Aamir noted. He lamented that such price rises resulted in decreased access to necessary communication services, widening the digital divide and limiting economic opportunities for the underserved people in the country, where a sizable portion of the population lives below the poverty line. He said policy changes like enabling deferred payment plans or providing spectrum in local currency would lessen the financial strain on the operators. “The policymakers must encourage a robust telecom sector that keeps innovating, growing, and offering reasonably priced services to people by developing a more sustainable pricing structure.” Talking to WealthPK, Dr Jorkanda Tomkova, a consultant at the World Bank on IT and digitisation, said that high spectrum costs affected the telecom sector’s overall competitiveness in addition to financial constraints. “High costs discourage new players from entering the market, leading to reduced competition and innovation.” 

She highlighted that the lack of competition means fewer options and greater costs for the consumers. “Furthermore, existing players become complacent, reducing their investment in service quality and innovation, which has long-term detrimental effects on the sector’s growth.” She further highlighted that high spectrum costs also impacted the government’s “Digital Pakistan” vision. “An affordable and widely available internet connection is necessary to realise the goal of a digitally connected society.” Jorkanda maintained that digital inclusion would not materialise if telecom companies were too constrained financially to make investments in network expansion, particularly in remote areas. “This will impede the country’s efforts to become a digitally inclusive society, hindering economic development.” The IT and digitisation expert suggested that the government and regulatory bodies needed to review current spectrum pricing regulations to address the issues. “It is crucial to have a balanced approach that ensures equitable profits for the government and financial stability of telecom companies.”

Credit: INP-WealthPk