ISLAMABAD: Pakistan’s last-minute price hike for a long-term mobile operating license renewal will worry foreign investors who are seeking stability in their operations, Jazz chief executive Aamir Ibrahim said, amid an ongoing court case about the issue.
Pakistan’s biggest mobile network Jazz, owned by Dutch giant VEON, and the country’s second-largest telecoms firm, Telenor, are challenging in court the license renewal process, which has seen the fee set at $450 million from an expected $291 million.
The battle comes as Pakistan’s government faces heavy pressure to lift tax revenues following a preliminary loan agreement with the International Monetary Fund that will require it to cut billions of dollars from its swollen budget deficit.
Pakistan’s telecoms sector has grown rapidly over the past decade but the market is hyper-competitive and mobile operators fear a tougher period ahead amid a slumping economy and rising inflation that is expected to lead to belt tightening by the country’s 208 million people.
Jazz believes the license increase goes against a previous agreement struck in 2004 and is also frustrated the government had two years to come to a renewal fee decision but raised the price only three weeks before the May 25 deadline.
“Ultimately the investor needs profitability, stability and continuity in a country that’s different from their own,” Ibrahim told Reuters at Jazz’s swish headquarters in the capital Islamabad earlier this week.
“So for a foreign investor having these surprises three weeks prior to the renewal of a license is a big shock.”
The government did not respond to a request for comment. The next court date is set for June 3.
Ibrahim said Jazz, which has 58 million subscribers, and Telenor expected the renewal fee to remain the same as during the auction in 2004, which was won by Warid, a company that was acquired by VEON’s Mobilink and merged to form the Jazz brand.
Another major sticking point for the mobile operators is the decision by Pakistan’s cash-strapped government to set the new fee in US dollars and not in local rupee currency, which has lost about 40 percent against the dollar in the last 18 months.
The 2004 auction for a 15-year license cost $291 million, equivalent to 17 billion rupees at the 2004 exchange rate. But with the rupee plunging to record lows against the dollar, Jazz now faces paying 67 billion rupees for $450 million.
“There is no precedent of the government offering (in dollars) any kind of a concession or a license to a company in Pakistan selling things in Pakistan,” Ibrahim said, pointing out that Jazz charges customers and earns in rupees, not dollars.
“Pricing in dollars is completely unsound.”
Pakistan secured preliminary agreement over a $6 billion IMF bailout program earlier this month that is expected to come with tough conditions requiring it to improve tax receipts to rein-in a ballooning fiscal deficit.
Ibrahim said higher fees will leave Jazz and other operators with less cash to invest in vital digital infrastructure Pakistan will need if it wants to modernize its economy and drive entrepreneurship and growth.
“I understand the government is cash-strapped but what they’re trying to do is milk for short-term gain,” he said. “But that in the process leaves the country behind.”
Pakistan’s biggest mobile operator warns license tussle worries investors
Pakistan’s biggest mobile operator warns license tussle worries investors
- Mobile operators Jazz and Telenor have gone to court challenging the government’s license renewal process
- A renewal fee has been set at $450 million from an expected $291 million, which mobile operators say is too high
IMF board to approve Pakistan reviews today ‘if all goes well,’ say officials
- IMF’s executive board is scheduled to meet today to discuss the disbursement of $1.2 billion
- Economists say the money will boost Pakistan’s forex reserves, send positive signals to investors
KARACHI: The International Monetary Fund’s (IMF) executive board is scheduled to meet today, Monday, to approve the release of about $1.2 billion for Pakistan under the lender’s two loan facilities, said IMF officials who requested not to be named.
The IMF officials confirmed the executive board was going to decide on the Fund’s second review under the $7 billion Extended Fund Facility (EFF) and first review under the $1.4 billion Resilience and Sustainability Facility (RSF), a financing tool that provides long-term, low-cost loans to help countries address climate risks.
“The board meeting will be taking place as planned,” an IMF official told Arab News.
“The board is on today yes as per the calendar,” said another.
A well-placed official at Pakistan’s finance ministry also confirmed the board meeting was scheduled today to discuss the next tranche for Pakistan.
The IMF executive board’s meeting comes nearly two months after a staff-level agreement (SLA) was signed between the two sides in October.
Procedurally, the SLAs are subject to approval by the executive board, though it is largely viewed as a formality.
“If all goes well, the reviews should pass,” said the second IMF official.
On approval, Pakistan will have access to about $1 billion under the EFF and about $200 million under the RSF, the IMF said in a statement in October after the SLA.
The fresh transfer will bring total disbursements under the two arrangements to about $3.3 billion, it added.
Experts see smooth sailing for Pakistan in terms of the passing of the two reviews, saying the IMF disbursements will help the cash-strapped nation to strengthen its balance of payments position.
Samiullah Tariq, group head of research at Pakistan Kuwait Investment Company Limited, said the IMF board’s approval will show that Pakistan’s economy is on the right path.
“It obviously will help strengthen [the country’s] external sector, the balance of payments,” he told Arab News.
Until recently, Pakistan grappled with a macroeconomic crisis that drained its financial resources and triggered a balance of payments crisis.
Pakistan has reported financial gains since 2022, recording current account surpluses and taming inflation that touched unprecedented levels in mid-2023.
Economists also viewed the IMF’s bailout packages as crucial for cash-strapped Pakistan, which has relied heavily on financing from bilateral partners such as Saudi Arabia, China and the United Arab Emirates, as well as multilateral lenders.
Saudi Arabia, through the Saudi Fund for Development, last week extended the term of its $3 billion deposit for another year to help Pakistan boost its foreign exchange reserves, which stood at $14.5 billion as of November 28, according to State Bank of Pakistan statements.
“In our view this [IMF tranche] will be approved,” said Shankar Talreja, head of research at Karachi-based brokerage Topline Securities Limited.
“This will help strengthen reserves and will eventually help a rating upgrade going forward,” he said.
The IMF board’s nod, Talreja said, would also send a signal to the international and local investors regarding the continuation of the reform agenda by Pakistan’s government.
