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Taxation trouble for an upswing telecom sector

Published on 12th Dec, Edition 50, 2016


Industry needs more innovative ideas and better customer services

Telecom sector is playing a pivotal role in the growth of country’s economy in provisions of providing employment and attracting investment. The sector is making valid contribution to national exchequer despite facing deep taxes.

As per estimates, total telecom investments in Pakistan will likely to reach $2.4 billion by 2020, while its revenue would cross Rs620 billion mark by the said period and mobile subscribers are expected to be around 161 million. There are reports that after the biometric re-verification of SIMs, started earlier this year, the number of mobile users in Pakistan dropped down to 114.7 million.

Revenue collected dropping down

The revenue collection from telecom sector has witnessed about 10 percent decline in current fiscal so far mainly due to heavy taxation. Telecom operators have expressed concern over heavy taxation and called for rethinking taxation regime so that true potential in telecom sector could exploit. In fiscal year 2015-16, total revenues of Pakistan’s telecom sector stands at Rs452.8 billion against Rs446 billion in previous financial year. Telecom sector contributed Rs157.8 billion into national exchequer on account of tax payment against Rs126 billion during the same period of previous year but this contribution was much less than fiscal year 2013-14 when it stood at Rs243.8 billion.

The General Sales Tax (GST) collection by telecom operators stood at Rs41.65 billion, down from Rs45.8 billion a year ago. This GST collection from telecom operators once touched Rs60.1 billion in 2013-14 but it declined afterwards. The country’s telecom sector fetched $719.7 million during the financial year 2015-16 against $1.001 billion in previous fiscal 2014-15. Out of total investment of $719.7 million investment, the telephone companies attracted investment of $659.4 million, Long Distant & International sector $6.3 million and Local Loop $54 million.

As per figures made available to PAGE, the LDI operators made Rs23 million during 2015-16, down from Rs80.81 million that they had generated a year ago. This sharp decline in LDI revenues is mainly due to withdrawal of ICH, a drive that allowed long distance and international operators to fix international incoming call prices at higher rates.

As per figures, Class Value Added Services showed remarkable growth and generated Rs43 million in revenues, up from just Rs3.78 million revenues a year ago. Pakistan Telecommunication Authority’s deposits during the report period stood at Rs34 billion, up from Rs7 billion a year ago.

In terms of the segregation of complaints on operator basis, a total of 6120 complaints were received against one company which is 27% of the total complaints. The other stood second in the row with 5392 complaints i.e. 23% and another stands third with 5276 i.e. 23% complaints. The fourth had 4296 complaints, which make up 19% of the total complaints, followed by the fifth with 1782 i.e. 8% complaints.

Financial experts believe that due to decline in LDI revenues after dismissal of ICH, increased competition and stagnant growth in voice revenues, telecom sector grew by less than 2 percent during the last year.

In today’s dynamic age of telecom and marketing, business scenarios demand spontaneous as well as highly calculated strategic decision making, they said. They are of the view that Pakistan’s telecommunication industry continued to face harsh regulatory measures and suffer from host of reasons in the year 2016.

Since the launch of third generation (3G) and 4G services in July 2014, the number of consumers looking to utilize high-speed mobile internet service which has crossed 24 million. In the meantime, the cellular subscriber base has crossed 125 million. Seeing these figures, people will believe that telecom companies (telcos) are doing a handsome business in the country.

A major issue for the industry is pricing, which has been brought down by fierce competition amongst the five telcos and has likely reached the edge of sustainability. Prior to the launch of high-speed mobile broadband, it was expected that data charges would push a lot of consumers out of the market as the telcos had spent over $2 billion on the 3G and 4G spectrum licenses and the rollout of next generation network, they said.

But surprisingly, they chose to keep data charges at the bare minimum, in a move, which initially sparked a digital revolution supported by affordable smartphones, that caused a 12% growth in broadband penetration in 2015, up from a mere 2.07% in 2014. This number is forecast to reach 44% by 2020, which according to the World Bank estimate will add 4.1% to the country’s economic output.

Although it is not uncommon for operators around the world to set data prices below sustainability levels for certain services, this is mostly balanced out by charging higher rates for other services.

In Pakistan, however, the operators cannot follow that path since other major services – voice and messaging – already have OTT (Over-The-Top) alternatives and the consumer does not have the same buying power as in other nations.

Lucky year for Huawei

The year 2016 can be marked lucky in the history of Huawei smartphones. Last year, Huawei shipped 100 million smartphones for the whole year, while it has set a new sales record.

It is projected that with the launch of much anticipated ‘Nova Plus’ in Pakistan, Huawei would surpass their expected sales record. In the past Huawei has set growth records in Pakistan as well and its success worldwide continues to set new precedents in the tech industry. With an ever increasing customer base and renewed innovations in its devices Huawei has become one of the top picks for tech enthusiasts in Pakistan like many other countries.

Huawei is a brand known for putting quality at the forefront of their product and endures top-notch tests and checks on its products’ Mechanical reliability, Environmental durability and Lifecycle reliability which is reason it make it standout from the rest.

First ever internet banking service

On the other hand, Mobilink Microfinance Bank Limited (MMBL) has become the first microfinance bank in Pakistan to launch Internet Banking for its customers. With TPS as its trusted technology partner for this digital banking feature, the bank is enabling its customers to process key financial and non-financial transactions at their fingertips.

Now MMBL’s customers can register themselves online, they can view their Account/Debit-Card Summary, they can view Transactions Limits assigned to their accounts/cards, can generate Statement of Account/Mini-Statement, can add a beneficiary, can setup and schedule fund transfers (Intra-bank and Inter-bank), can sign up for their ATM Card/Cheque Book/On Demand Statement of Account, can suspend their Internet Banking Account, and can edit their ID and password. Bill Payments & Mobile Application is also being added to the online banking service in the next few weeks.

The smooth user experience will assist the users feel in control, thus, building trust and confidence. MMBL chose PRISM, because of its depth of functionality including multi-country, multi-lingual and multi-currency capabilities.

“By implementing Internet Banking, we have been able to provide our customers with the best possible services that enables them access the latest state-of-the-art online banking technology. We decided to partner with TPS because of its history of successful implementation of retail and internet banking solutions in Asia, Middle East, and Africa,” said spokesman of MMBL.

He said, “Our internet banking solution will help Mobilink Microfinance Bank Limited deliver the digital banking experience that will enable the bank stay at the heart of their consumers. With the flexibility inherent in PRISM’s architecture, the bank will be able to offer new service offerings as customer demands evolve,” said Shahzad Shahid, CEO – TPS.”

If we want to move forward, we would have to go for innovation which can only help achieve progress and prosperity. Proper use of telecommunication services in all segments can revolutionize whole set up. Telecom operators need to facilitate the people by offering best solutions through quality service, said the concerned experts.


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