Amir Saeed

The financial challenges confronting the country’s telecom sector hamper its potential for growth and digital advancement despite rising demand for mobile and internet services.

Talking to WealthPK, Syed Fakhar Ahmed, interim general secretary of the telecom operators’ association, highlighted that new investments in digital infrastructure were hindered by a variety of challenges. “High capital costs deter potential investors, who find the initial investment for infrastructure development prohibitively expensive. Additionally, the regulatory landscape poses significant barriers, with complicated processes for obtaining necessary licences and approvals.” “One significant obstacle is the Right of Way (RoW) problem, which raises the cost and complexity of implementing new technologies. These challenges create an environment where potential investors hesitate to enter or expand within the market, ultimately stalling the growth of essential digital services,” highlighted Ahmed. He said that the taxation system added another layer of complexity for telecom operators.

“High and unpredictable taxes significantly impact profitability, making it difficult for companies to plan for the future.” “An evolving tax environment, which leads to higher operating costs, makes investors cautious. This uncertainty prevents investment and innovation, leading to a stagnation in the advancement of digital services that are critical for economic development,” he said. “Policymakers must solve these systemic concerns to protect the country’s digital future. Streamlining regulatory processes, reducing unnecessary taxes, and creating an environment that fosters investment will be critical,” Ahmed emphasised. Talking to WealthPK, Mahnoor Arshad, a research associate at the Sustainable Development Policy Institute (SDPI), said that Pakistan had the lowest Average Revenue Per User (ARPU) in the world, primarily due to intense competition among service providers and structural issues.

“Although intense competition can lead to better services and lower prices for consumers, it has come at a cost for operators.” “The continuous decline in ARPU has led to dwindling earnings for telecom companies, raising concerns about their long-term viability. Operators struggle to maintain profitability in a market that forces them to keep prices low to attract and retain customers,” Mahnoor highlighted. She pointed out that one of the leading telecom operators in Pakistan was planning to exit the market due to these economic challenges. “Telenor’s planned departure highlights a crucial problem: the challenge of repatriating profits. This challenge, compounded by high operational costs and regulatory hurdles, is influencing the decisions of foreign investors and signalling a troubling trend for the sector.”

“The exit of a major player not only reduces competition but also hampers the growth of the digital ecosystem, leaving consumers with fewer options and potentially lower service quality,” she said. Mahnoor lamented that as the telecom industry grapples with these mounting challenges, the future of digital connectivity in Pakistan remains in the balance. “The combination of high investment barriers, low ARPU and regulatory challenges creates a vicious cycle that undermines growth. By giving the telecom sector stability, the government can create the path for improved digital infrastructure that satisfies people’s needs and promotes economic progress,” she emphasised.

Credit: INP-WealthPk