Raising Telco License Fees in Pakistan is a Serious Concern – warns GSMA

The GSMA has raised serious concerns over the fact that Pakistan government and PTA (Pakistan Telecommunication Authority) increased the license fees by unreasonable margin.

Mobile carriers in Pakistan will have to renew mobile spectrum licenses according to new fees, which GSMA has warned, poses a significant risk to the mobile connectivity of millions of users in the country.

Existing licenses of multiple mobile operators are set to expire this year and they have been notified to pay almost double the fee, compared to what they initially got licenses for, to further renew them.

Licenses of Jazz and Telenor, country’s largest operators, are set to expire on May 25th, 2019. According to new conditions, both the operators will need to pay $450 million to renew their licenses. Consider the fee ($291 million) at which operators originally acquired licenses at auction in 2004. Also consider the dollar rate which is now more than the double since then.

The operators have been told to pay according to new terms or discontinue operations, which would mean disconnecting millions of customers for sure. Zong, a third mobile operator in the country, is also due to renew its license later this year on by October 22nd, 2019.

The GSMA, that represents the interests of mobile operators worldwide, has now warned that the high fees proposed for renewing these licenses will slow the development of Pakistan’s digital economy and seriously affect operators’ ability to invest and support affordable services. The mobile industry association raised its concerns today in a letter to the PTA and Frequency Allocation Board (FAB).

Safeguarding mobile connectivity

Mobile technology is the primary means of communication for millions of Pakistanis, and enables the delivery of vital education, healthcare and financial services. Recent GSMA Intelligence research estimates the total economic impact of mobile to Pakistan’s GDP is $17 Billion (5.4% of total GDP).

To safeguard the continuity of mobile services for citizens the GSMA calls for the government in Pakistan to extend the deadline for agreeing license terms for all MNOs on a 3-month rolling basis at no cost, until it can reach a decision with operators.

High Spectrum Prices

The GSMA also calls for the high spectrum fees to be reconsidered. High fees make it difficult for operators to provide and expand affordable services and impact investment in network infrastructure that benefits the wider economy. The government in Pakistan should not focus on short-term revenue maximisation through raising spectrum fees. The renewal price should take into account the current market and seek to enable the laudable policy vision and goals in the Digital Pakistan Policy, not further burden operators as they seek to connect the citizens of Pakistan.

Burdensome Taxes

In addition, operators already face many taxes and fees, which should be considered when setting further financial obligations on them. In 2017, the total direct tax and fee payments by the mobile sector were estimated at $950 million (29% of operator revenue). The mobile sector makes a large contribution in taxes and fees relative to its economic footprint with around 12% of its revenue going to sector-specific tax and fee payments. Moreover, the wider mobile ecosystem contributes to the fiscal income of Pakistan, with a total of $1.9 billion in direct and indirect taxes in 2018.

Official Statements

Brett Tarnutzer, Head of Spectrum, GSMA said:

It’s consumers that will lose out from imposing unfair conditions that put operators’ businesses in jeopardy. We’ve already seen the damaging consequences that high spectrum prices have on coverage and quality of service in other countries. It’s important that Pakistan doesn’t repeat these mistakes, and place gaining inflated revenues from spectrum licenses above the connectivity of its citizens.

Tarnutzer further added:

These high fees work against Government efforts to bridge the digital divide and build the digital economy. Spectrum prices and taxes should be set at a sufficiently low level that allows operators to deliver affordable services and deploy mobile broadband widely. We are committed to engage in an open dialogue to help the Government achieve its policy objectives and facilitate sustainable investment in Pakistan’s digital future by all mobile operators.