Industry stakeholders say currency depreciation posing existential threat to Pakistan’s telecom sector

A shopkeeper deals with customer at his mobile shop in Islamabad on May 20, 2022. (Photo courtesy: AFP/FILE)
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Updated 04 February 2023
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Industry stakeholders say currency depreciation posing existential threat to Pakistan’s telecom sector

  • Telecom operators maintain historic devaluation of the Pakistani rupee is hurting profitability, future investment planning
  • Pakistani telecom operators pay license fees and interest on instalments in dollars while making their earnings in Pak rupee

KARACHI: Pakistan’s telecom operators said on Friday the industry was facing an “existential crisis” due to the depreciation of national currency which was increasing their operational costs while disrupting investment planning.

The country has witnessed a major spike in cellphone usage in recent decades, taking its tele-density to 86.34 percent. According to official figures, Pakistan has 193 million cellphones and 122 million mobile broadband subscribers.

Telecom operators pay license fees and interest on instalments in the United States dollar, though they make their earnings in the Pakistani rupee which has depreciated by 25.93 percent during the current fiscal year. On Friday, the national currency also hit a new historic low of Rs276.58 against the greenback.

Given the current financial situation of the country, leading telecom players find themselves in troubled waters amid reduced profitability and declining possibility of expanding business.

“The telecom industry faces an existential crisis due to the continued devaluation of currency,” Irfan Wahab Khan, CEO of Telenor Pakistan that boasts of 25.11 percent market share, told Arab News.

“With the spectrum price and all its future instalments and interest payments in USD, each time the rupee devalues, it causes the overall price to increase significantly, impacting our profitability and making any future investments nearly impossible,” he continued.

The Telenor chief said the escalating interest rates and cost of capital, along with excessive fuel, electricity and other input costs, had severely affected the company’s operations.

Another industry player, Pakistan Mobile Communication Limited (PMCL), which operates under the name of Jazz and owns 38.23 percent market share, has also sounded alarm bells.

Aamir Hafeez Ibrahim, the Jazz CEO, took to Twitter on Thursday to highlight the prevailing challenges, saying the rupee devaluation had jeopardized the business case for telecom companies.

Ibrahim noted that 50 percent license renewal fee cost the company Rs44.5 billion last year. However, its 10 percent instalment this year was somewhere over Rs13 billion.

“Due to ongoing currency devaluation we’re unable to determine the amount we’ve to pay in instalment next year adding to uncertainty that no business plan can withstand,” he said in a Twitter post, adding: “Sadly wrong policy of pegging telecom license price to [US dollar is] pushing us from #DigitalEmergency to #DigitalCatastrophe.”

Last month, the PMCL paid Rs24.24 billion ($105.80 million) license renewal fees to the telecom regulator, Pakistan Telecommunication Authority (PTA).

Ibrahim said that telecom was a cross-sector enabler, building digital highways and facilitating other economic areas to create value as well.

“Unfortunately, in our country, the industry is still perceived as an opportunity to fill short-term revenue gaps for the government, which consequently deters a broader and longer-term policy agenda aimed at expanding universal broadband coverage, enabling everyone to access education, health care, banking, and other quality of life improving services,” he told Arab News.

“While we have talked a lot about Digital Pakistan, without the right policy interventions we could actually be looking at digital dark ages,” he added.

Telecom operators and industry experts agreed the solution to the current depreciation problems was to link spectrum prices with local currency and alleviate some tax burden.

“The government is in a position to mitigate the industry’s risk,” said the top Telenor official. “For starters, the spectrum price can be denominated in local currency as most countries do. This also helps alleviate the risk of currency devaluation.”

He also called for “rationalization of taxation” on cellular services and handsets along with reduction of regulatory dues.

Parvez Iftikhar, an international consultant on telecom policy and regulation, agreed with both the suggestions.

“When the operators say they are earning in local currency, they are right in demanding that the spectrum fee must also be paid in Pak rupees because it is not something that they import and pay in dollars,” he said while speaking to Arab News.

He denied having any knowledge of the actual profitability of telecom operators, though he maintained one way of measuring that was to look at their investment in the country.

“I don’t see any significant investment in Pakistan as compared to India and Bangladesh etc.,” Iftikhar said, adding: “This shows that the returns are not significant.”

“The telecom sector only needs enabling environment and facilitation to grow further,” he continued.

According to the PTA, the telecom industry revenue increased to about Rs694 billion during the last fiscal year and it contributed over Rs325 billion to the national exchequer.


After ICUBE-Q, Pakistan to launch modern communication satellite into space on May 30

Updated 28 May 2024
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After ICUBE-Q, Pakistan to launch modern communication satellite into space on May 30

  • The satellite will help usher in digital era in Pakistan by providing Internet to country’s remote areas, the national space agency says
  • The satellite launch from Xichang Satellite Launch Center (XSLC) will be broadcast live from agency centers in Islamabad, Karachi

ISLAMABAD: Pakistan will be launching its latest modern communication satellite, PAKSAT MM1, into the space on May 30, Pakistani state media reported on Tuesday, weeks after it launched ICUBE-Qamar (ICUBE-Q) into the lunar orbit.

Pakistani satellite ICUBE-Q was launched on May 3 aboard China’s Chang’e-6 lunar mission from Hainan, China. A major milestone in Pakistan’s space exploration efforts, the satellite successfully entered the moon’s orbit on May 8, and shortly after began transmitting the first images from lunar orbit.

The Pakistan Space and Upper Atmosphere Research Commission (Suparco), Pakistan’s national space agency, now plans to launch the communication satellite with Chinese assistance on May 30.

“The satellite PAKSAT MM1 would be launched from Xichang Satellite Launch Center (XSLC), China,” the Radio Pakistan broadcaster reported.

“The SUPARCO MM1 Satellite is a result of the tireless efforts of Pakistani scientists and engineers and it is conceived keeping in sight the growing needs of the country in the broad spectrum of communication and connectivity.’

The satellite would help usher in a digital era in Pakistan by helping provide Internet to remote areas, the report read, citing Suparco officials.

The launch ceremony would be broadcast live from Suparco’s offices in Islamabad and Karachi.

Established in 1961, Suparco manages Pakistan’s space program, enhancing the nation’s capabilities in satellite communications, remote sensing and meteorological science.


Pakistan confers civilian award on Islamic Development Bank chief for his eminent services

Updated 28 May 2024
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Pakistan confers civilian award on Islamic Development Bank chief for his eminent services

  • The IsDB is an international financial development institution that aims to foster socio-economic development in Muslim member countries
  • Pakistan is also among 56 members of the IsDB where the IsDB has invested in various projects and third largest beneficiary of its financing

ISLAMABAD: Pakistan’s Ambassador to Saudi Arabia Ahmad Farooq on Tuesday conferred the ‘Hilal-i-Quaid-i-Azam’ medal on Islamic Development Bank (IsDB) head Dr. Mohammed Sulaiman Al-Jasser in the Saudi city of Jeddah, the Pakistani consulate said. 

The Hilal-i-Quaid-i-Azam medal is one of Pakistan’s highest civil awards that is awarded to foreign nationals for their eminent services to Pakistan. 

The award ceremony was attended by representatives from Pakistan’s missions in the Kingdom and to the Organization of Islamic Cooperation (OIC).

“The President of Pakistan has conferred this medal on Dr. Al-Jasser for his instrumental role and for IsDB Group’s leadership in supporting Pakistan’s economic and development agenda and support at important world forums,” the Pakistani consulate in Jeddah said in a statement. 

The IsDB is a multilateral and international financial development institution that aims to foster socio-economic development in Muslim member countries. Pakistan is also among the 56 members of the IsDB where the IsDB has invested in various projects. 

In March, Pakistan and the IsDB signed a financing agreement worth $200 million for the Sindh Flood Emergency Housing Reconstruction Project. The project aims to construct 700,000 houses, benefiting an estimated 4.2 million people in rural areas of the southern province, and will support the creation of 75,000 water, sanitation, and hygiene facilities for over 1.3 million individuals.

The Bank announced a $100 million loan to support Pakistan’s polio eradication efforts in December 2023, on the sidelines of the COP28 United Nations climate summit in Dubai. 

After the devastating floods of 2022 killed 1,700 people and inflicted losses worth $30 billion on Pakistan, the IsDB pledged $4.2 billion for the South Asian country over the next three years.


Pakistani, Saudi investors to set up $5 million edible oil refinery in Kingdom — Pakistan trade official

Updated 28 May 2024
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Pakistani, Saudi investors to set up $5 million edible oil refinery in Kingdom — Pakistan trade official

  • Official says the joint venture is expected to be signed in next six months and it will allow export of 50 percent edible oil
  • Saudi authorities are offering land and other facilities to investors to encourage investment in the Kingdom, he adds

KARACHI: Pakistani and Saudi investors are establishing a $5 million edible oil refinery in Saudi Arabia through a joint venture (JV), a senior Pakistani trade official said on Tuesday, following recent business-to-business interactions between the two countries.

The development comes weeks after a 50-member, high-level delegation, led by the Kingdom’s Assistant Minister of Investment Ibrahim Al-Mubarak, arrived in Pakistan to explore investment opportunities in the South Asian country.

Pakistan and Saudi Arabia have been working closely in recent weeks to increase bilateral trade and investment deals, with Crown Prince Mohammed bin Salman last month reaffirming the Kingdom’s commitment to expedite an investment package of $5 billion.

“We are putting up an edible oil refinery in Saudi Arabia with the local partners. We have shared the feasibility with each other, and we will sign [an agreement] very soon,” Atif Ikram Sheikh, president of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI), told Arab News on Tuesday. “There will be a joint venture.”

Ikram, who runs edible oil refineries and other businesses in Pakistan, informed that the project cost would be equally shared by investment partners, including himself.

“The project cost will be $5 million and we will share the cost together and this would be materialized within six months,” he said, adding the Saudi authorities were offering land and other facilities for the refinery. 

Saudi Arabia is currently consolidating its economy on modern lines under Vision 2030, a strategic development framework intended to cut the Kingdom’s reliance on oil. Under the framework, the Kingdom is also encouraging investment in diversified sectors to increase its export base.

“Their [Saudi authorities] condition is to maximize oil export up to 50 percent, while the rest you can sell in the local market,” Sheikh said.

The FPCCI chief said Saudi Arabia’s interest in Pakistan’s diversified sectors was “constantly increasing” and both sides had made tangible progress, including Saudi investment inflows in oil, agriculture and other sectors. 

In December last year, Aramco, one of the world’s leading integrated energy and chemicals companies, signed an agreement to acquire a 40 percent equity stake in Gas & Oil Pakistan that followed the signing of an agreement in November 2023 by Shell Pakistan (SPL) with Saudi Arabia’s Wafi Energy to sell its domestic operations after Shell Petroleum Company announced its exit from Pakistan with the sale of 77 percent shareholding in the local business.

Pakistani traders also expect further inflow of investment from the Gulf countries.

The FPCCI president said Pakistan’s Special Investment Facilitation Council (SIFC), a body consisting of Pakistani civilian and military leaders and specially tasked to promote foreign investment in Pakistan, is playing a crucial role in boosting investment in the South Asian country. 

The council, established in June last year, is focusing on investments in energy, agriculture, mining, information technology and aviation sectors, specifically targeting the Gulf nations.


Pakistan PM says ‘deeply concerned’ about Israeli strikes on Rafah, deplores violation of international law

Updated 28 May 2024
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Pakistan PM says ‘deeply concerned’ about Israeli strikes on Rafah, deplores violation of international law

  • Israeli tanks reached the center of Rafah for the first time on Tuesday, three weeks into an operation that has sparked global condemnation
  • Shehbaz Sharif says Pakistan strongly condemns Israel’s bombardment of Rafah, urges international community, particularly UN, to play role

ISLAMABAD: Pakistan Prime Minister Shehbaz Sharif said on Tuesday he was “deeply concerned” about Israeli strikes on the southern Gaza city of Rafah, deploring repeated violations of the international law by the Jewish state.

Israeli tanks reached the center of Rafah for the first time on Tuesday, witnesses said, three weeks into a ground operation in the southern Gaza city that has sparked global condemnation.

Overnight, Israeli forces pounded the city with airstrikes and tank fire, pressing their offensive despite an international outcry over an attack on Sunday that sparked a blaze in a tent camp, killing at least 45 Palestinians.

Sunday’s attack on the Rafah refugee camp came two days after the International Court of Justice (ICJ) ordered Israel to end its military offensive in Rafah, where more than half of Gaza’s population had sought shelter before Israel’s incursion earlier this month.

“Deeply concerned by the disturbing developments in Rafah. Pakistan strongly condemns Israel’s indiscriminate bombardment that has led to heavy casualties,” PM Sharif said on X.

“It is deplorable that international law is being repeatedly violated, despite ICJ’s recent clear verdict against Israel.”

The case against Israel was initiated by South Africa in December 2023, where it labeled Israel’s actions in the Gaza Strip as “genocidal,” asserting that they intended to destroy the Palestinian people in ways specified under the 1948 Genocide Convention.

Pakistan does not recognize the state of Israel and calls for an independent Palestinian state based on “internationally agreed parameters” and the pre-1967 borders with Al-Quds Al-Sharif as its capital.

In recent months, the South Asian country has repeatedly raised the issue of Israel’s war on Gaza, launched last October, at the United Nations through its permanent representative, Ambassador Munir Akram.

“The international community, particularly the UN, must play its part in protecting civilians from such brutal aggression,” PM Sharif said in his statement on X.

The war on Gaza broke out after Hamas attacks on Israel on October 7, which killed more than 1,100 people, in response to the deteriorating condition of Palestinian people living under Israeli occupation.

Israel launched a retaliatory offensive, widely viewed as disproportionate, in which more than 35,000 Palestinians, mostly women and children, have lost their lives, according to the Palestinian Health Ministry.


Pakistan PM calls for minimizing load shedding amid heatwave, urges steps against power theft

Updated 46 min 58 sec ago
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Pakistan PM calls for minimizing load shedding amid heatwave, urges steps against power theft

  • Power outages are not uncommon in Pakistan during the summer months when the demand on the national grid spikes sharply
  • Pakistan’s power sector has also been plagued by high rates of power theft and distribution losses, leading to huge debts

ISLAMABAD: Prime Minister Shehbaz Sharif on Tuesday urged authorities to minimize load shedding in Pakistan amid an ongoing heatwave and to take steps against power theft in the country, his office said.

The directives were issued during a meeting Sharif presided over in Islamabad to review the supply of electricity, load management and measures against power theft in parts of the country.

Power outages are not uncommon in Pakistan during the summer months when the demand on the national grid spikes sharply due to the widespread use of air conditioners and desert coolers.

These seasonal surges often lead to prolonged power outages, which fuel public discontent, particularly during the intense heatwaves that have swept across Pakistan in recent years.

“The situation of [power] load management in extreme heat should be improved, keeping the convenience of the public in view,” Sharif was quoted as saying by his office.

“Provincial governments and law enforcement agencies should fully support the anti-electricity theft campaign.”

The South Asian nation’s power sector has been plagued by high rates of power theft and distribution losses, resulting in accumulating debts across the production chain — a concern also raised by the International Monetary Fund (IMF) during recent bailout talks.

The government of PM Sharif has recently launched a campaign to curb power theft in the country to avoid huge financial losses.

The prime minister said he would personally review progress on the drive against power theft, urging authorities to ensure that consumers were not charged excessive bills.

“The national interest and the development and prosperity of the country require that all the government institutions perform their responsibilities effectively against electricity theft,” he added.