FOCUS SHIFT—FROM GROWTH TO PROFITABILITY
Nov 22 - 28, 2010
The telecommunication industry has witnessed significant growth during the last 5/6 years. In Pakistan, it has emerged as a most vibrant player as it received the major share in the foreign investment received in the country during recent years. The performance of telecom sector in terms of infrastructure and subscribers growth pattern are unmatched across the world. Mobile subscribers have crossed the figure of 10 millions which is almost double the number of landline subscribers. It has emerged as one of the top revenue generating industries for the government of Pakistan.
Beside, the government has received the biggest contribution from telecom industry than any other sector for its welfare schemes especially during the recent floods in the country and the post-floods rehabilitation programe.
Despite the overall slowdown in Pakistan's economy during the last 2/3 years, the telecom industry has maintained its upward trend. However, the rate of growth has fallen. Commenting on this scenario, an expert told this correspondent on condition of anonymity that the telecom industry witnessed significant growth during the last 5/6 years due to the fact that the primary focus was growth than profits. However, due to the overall political and economic situation in Pakistan as well as the serious competition in the industry growth has stalled. Currently, the industry was on a low margin. In such a market, operators are striving to increase their revenues from innovative new services instead of traditional approach.
According to him, telecom in Pakistan is presently facing numerous challenges in the form of shortage of electricity, rising energy cost, high inflation rate, constant devaluation of currency, deteriorating security situation and higher taxes. If the rate of taxation on telecom industry is reduced to the level of other industries, the telecom industry is still capable to grow further.
The telecom industry of Pakistan, which had been showing a fantastic growth of about 50 per cent annually during the earlier five years, took a reverse turn after July 2008 when the government introduced new taxes. The government is now charging Rs31 in the shape of taxes on a Rs100 pre paid card from cellular subscriber. Taxation measures, however, did not serve the desired objective of raising additional revenues because of the decline in growth.
Before these measures, the leading companies operating in Pakistan were sure to escape the effect of the global recession as they had a big untapped market in the country. In view of this market potential, mobile companies continued with heavy investments in the infrastructure. Increase in taxes and duties on the telecommunication services in the budget 2008-09 made negative in attracting fresh investment as the resultant increase in the cost of mobile services turned out to be beyond the purchasing power of the remaining potential subscribers of about five millions living in the rural areas. Because of all these factors the growth rate of telecom industry has suffered and has come down.