Pakistan’s high IT-telecom profits attracting new FDI

telesHigh IT-telecom profits have started attracting new foreign investment and big revenues for the government. The government’s telecom policy led by Ms Anusha Rehman, Minister of IT and Telecommunications, is doing well for all the stakeholders, investors, users and the government, the latest company results indicate.

IT-telecom sector attracted $15 billion in foreign investment during 2004 and 2008 when the telecom sector was opened up and IT and cellular services recorded big growth.

The latest FDI proposal is by Saudi Arabia’s National Technology Group (NTG) to invest $200 million in the sector. Saudi Arabia along with the UAE is one of the most enthusiastic and sound investors in Pakistan. This offer is likely to help generate new investment in the telecom sector.

The telecom sector revenue totalled Rs300 billion in the first two quarters — July-December of the current FY-2015.

The additional revenues in the next five years are projected to increase by Rs800 billion — much higher than the present level. This is projected to accrue from the present as well as new investment, expansion of IT, telecom and 3G and 4G services — launched in 2014. “There is a vastly growing demand for these new services in the private and public sector,” Pakistan Telecom Authority (PTA) estimates.

The private sector invested $1.1 billion in the auction of 3G and 4G Spectrum in 2014. After the auction, “several hundred million dollars were also spent by the private companies on the network upgradation. The sector in 2014 had projected new foreign investment inflows of $7 billion to $10 billion over the next two to three years,” the investors said.

At the same time, the government has asked PTA to lead development, expansion and upgradation of the telecom sector, protect consumer rights and ensure interest of all the stakeholders. The government and the industry expect the introduction of 3G and 4G services and expansion of the sector will provide jobs to 900,000 to 1.2 million people. One estimate is that this expansion will contribute $3.8 to $11.8 billion to the GDP as the IT-telecom services expand over the years.

This year also saw PTA and the five cellular services operating in Pakistan, undertake streamlining of SIM sales and complete the task of the Biometric Verification System (BVS) to prevent their misuse by the criminal elements. The five companies are: Egypt-based Mobilink, Norway’s Telenor, etisalat’s Ufone, China-based Zong and UAE-based Warid.

“The commercial launch of 3G and 4G services has opened new opportunities for revenue generation for the mobile service operators,” PTA chairman, Dr Ismail Shah says.

“Our optimism is based on the fact that opening up of 3G and 4G services has led to development of a vast number of new applications and database services. The people are quickly adopting to these news services and technologies,” he said.

These developments have led to a surge in revenues of the five cellular mobile companies operating in Pakistan, totalling Rs37.3 billion in two July-December quarters of 2014, up 69 per cent as compared to the like period 2013.

The IT-telecom revenues are slated to grow faster in the future as more and more users of 3G and 4G services are added to the networks. The current projections are that these services will contribute close to 1.4 per cent to the national GDP by 2025, if not earlier. Alongside this the actual export of telecom services will grow from the present Rs1.4 billion a year to Rs4 billion by 2020.

Dr Ismail Shah has just discussed with the PTA-organised Broadband Forum, the benefits of 3G and 4G spectrums. He asked the industry, “it is imperative, and the benefits of the broadband services should reach to the grass root level in the form of e-services, e-health, e-education, e-commerce, and e-governance.”

PTA’s Member Finance Tariq Sultan said the government has prepared the National Financial Inclusion Policy (NFIP) to provide digital accounts to 50 per cent of the population by 2020.

Broadband Forum had a separate session to discuss: “Maximising the socio-economic impact of broadband.” It focused and agreed on the greater use of broadband technologies for the uplift of different segments of the society.” The session’s panelists included: Telenor chief for Corporate Services Aslam Hayat, USAID senior economic growth advisor Kanwal Bokhari and Grant’s international representative Dr Amir Mateen.

While all roads led to an mobile-IT boom, an irritant has just cropped up in Punjab where a 19.5 per cent sales tax has been levied on internet use. This tax is already in force in Sindh since 2014 and in Khyber Pakhtunkhwa since 2015. Some critics say the tax will restrict use of internet broadband services.

But the fact is that the government, the telecom sector and the users all are set to enlarge investment in this industry and provide its benefits to millions more in Pakistan.