The IT sector had a difficult year, with telecom operators and users bearing the brunt of the pain, especially after the April change of government and the subsequent belt-tightening.
The IT sector had a difficult year, with telecom operators and users bearing the brunt of the pain, especially after the April change of government and the subsequent belt-tightening. Call and internet rates increased, but service quality deteriorated and speeds slowed in 2022. Network outages were exacerbated by “connectivity load-shedding” in the aftermath of hours-long power outages and rising fuel prices.
Connectivity load-shedding refers to the practice of reducing the amount of network traffic that a network can handle in order to prevent a complete network outages.
Among the few bright spots was the cloud-first policy, which was introduced in February and aimed to shift federal public-sector entities away from on-premise infrastructure. Following that cloud, the ministry asked for the moon when it set a $5 billion export target for IT exports, a figure stakeholders say is far from achievable.
The export of 120,000 mobile phone sets to various markets in the Middle East and Africa was one bright spot in an otherwise bleak IT landscape.
However, the CEO of Inovi Telecom, the company that shipped the consignment last month, stated that such one-time, large-ticket orders would not work and emphasised the importance of regular export orders for the sector’s growth.
Inovi is the only local company that has exported mobile sets out of the 31 mobile phone licence holders in Pakistan. Its CEO, Zeeshan Mian Noor, stated that the mobile industry has been given a quota of $83 million in letters of credit (LCs) per year to import key components for mobile phone set assembly.
However, “the fact is that raw material worth $185 million is required to meet the demand for mobile sets in the Pakistani market,” he said, adding that exporting phones was a distant dream when manufacturers were unable to meet local buyer demand.
The telecom industry said it was the hardest hit in 2022, as operating expenses increased by around 20% year on year while revenue growth remained in the single digits.
The sector has repeatedly claimed that Pakistan has one of the highest rates of taxation, interest rates, and rupee depreciation. All of this, combined with rising energy costs, resulted in more than $100 billion in unanticipated costs for the industry in the previous fiscal year, according to the report.
With power outages lasting up to 12 hours in some areas of the country and a sharp increase in diesel rates used to power the companies’ generators, large areas of the country face network outages during power outages. With power outages, country has to face network outages.
“Diesel-powered generators and battery capacity at the towers were designed for two to three hours of outages,” said Jazz CEO Aamir Ibrahim.
He was disappointed that the average revenue per user (ARPU), a key metric used to assess the financial health of cellular mobile operators, had dropped to less than a dollar from $9 in 2003–04, when only 2G services were available.
Pakistanis pay 34.5 percent tax on each mobile phone call, which includes a 15% withholding tax and a 19.5 percent general sales tax. The incumbent government’s tax increase has resulted in higher phone and internet rates, reducing consumption and further reducing company revenues.
Consumers, on the other hand, are seeing an increase in “call latency and black holes in the networks,” which means that calls or internet are either slowing or dropping. Telecom companies blame the government for failing to implement appropriate policies and delaying the planned spectrum auction.
Irfan Wahab Khan, CEO of Telenor Pakistan, stated that the country needed more spectrum to improve the quality of service in the telecom sector and that the government should come up with the right terms and conditions, including pricing.
At the same time, due to several restrictions imposed by the central bank, IT exports and freelancer performance have suffered, and the $5 billion IT export target for the current fiscal year appears unattainable.
Former P@SHA chairman Barkan Saeed predicted that exports of IT and IT-enabled services would fall short of the $3.5 billion target in the fiscal year 2021–22. “This year, even that figure appears difficult because of inconsistent policies,” he explained.
The Minister of Information Technology acknowledged the sector’s problems. He stated that the information technology sector required “special attention” because it was not a stand-alone service or industry, but rather a catalyst that could boost all sectors through digitisation.
However, he added that his ministry’s performance “surpassed the output of other ministries” in 2022. “Despite various political and economic constraints, the telecom sector in the country has continued to serve the public without passing on the entire rising cost of business,” the minister said.
He emphasised that the Universal Services Fund (USF) has made significant progress in providing telecom services to small towns and even the outskirts of major cities, connecting approximately 4.5 million people. Among the accomplishments of the IT ministry was significant progress on the regulatory front, including approval of the country’s cloud-first policy.
Furthermore, the Personal Data Protection Bill and the Digital Pakistan Policy, 2023, are awaiting cabinet approval, and the artificial intelligence and freelancer policies are in their final stages, which are likely to boost IT support businesses in the country.