FDI in Telecom: Dried up tree
DESPITE OF having competitive ARPU (Average Revenue Per User), the failure of PTA in getting more investments from the telecom companies is out of wisdom. It seems, rather PTA is fully satisfied with the current poor performance or still lost in the good memories of 2005 – 2008. The impact of low investments can easily be seen in shape of low tele-density and reduction of jobs in telecom market. While, full concentration is given to collect taxes which at the end to be paid by poor subscriber. PTA should not work only as tax collecting machine of GOVT but also feel social corporate responsibility to enhance telecom environment throughout the country and promote investment and growth culture for both corporations and public.
Buy one get two free was the policy at the time of PTCLs sale out. Etisalat purchased PTCLs share and automatically got control of Ufone and Paknet as well. Though, it was one of the biggest deal in Pakistan telecom sector which gave boast to FDI, for which PTA takes credit as an achievement since long, but no real advantage of this FDI to the nation and also no other major breakthrough in terms of FDI since long has been seen.
FDI in telecom sector remained prominent in overall FDI in Pakistan during 2006 – 2008 but after that we can notice downfall in all sectors specially in Telecom. In 2010 – 2011 percentage share of telecoms FDI reduced to 5% in the overall picture.
If we talk about the investment in cellular sector, it has reduced tremendously. This reduction in investment not only stops development in Telecom sector but also effects job market. Lets take the example of tele- density , in last 3 years , it has hardly increased by 8 percent. While , if we compare with Indian cellular market , Pakistan was far ahead of India in terms of tele- density but due to reduction in investment during last three years the current figure of tele- density in Pakistan is around 64% while same KPI for Indian market is around 72%.
This reduction trend in investment graph hits local job market for Telecommunication professionals badly. In 2005 – 2006 after tremendous growth in Telecom sector many universities launched engineering programs in Telecommunications but now due to huge cut in jobs cut, there are very few universities , which are offering degree programs in Telecom. Also the fresh graduates , find it very difficult to get jobs due to lack of experience and opportunities.
The reduction in investment is caused by poor strategy of regulator and unreliable political situation in the country. In this situation, there was strong room for the regulator to lead from the front in many ways. Some of the steps that could been taken may be;
• Ensuring investors the continuity of policies
• Give confidence to the investor to safeguard their investment
• By creating competitive environment which force operator to invest more
• By implementing strong QoS criteria which forces operators to optimize their network
• By making laws to ensure Telecom companies to roll out in all parts of the country (while currently, companies are totally ignoring those areas which are not very business oriented)
Lets talk about ARPU (Average Revenue per User ) . it is quite comparable with competitive market . It was around 2.5$ during 2008 to 2011 while in India average ARPU is 2$. It shows earning margin for telecom companies in Pakistan is not bad, so why these companies are reluctant to invest more? The answer to this question can only be given by the Telecom companies or the regulator.
As far as Tax collection is concerned PTA seems to be good enough in this area. 117 Billion PKR were collected in 2010 – 2011 only. While this figure is continuously increasing from 2005 to 2011 that means PTA is serving govt well and like other issues, govt knows only how to get money out of the people or corporations ignoring the interests of investors and the public.
Privatization is a healthy sign but Govt/Regulator should have set example for Privatization. It should not be done blindly and without any clear vision. When shares of PTCL were sold out to Eitisilat huge amount of FDI came in to the county Though, the sale deal had lot of loop holes and can be challenged but at least due to this deal a big amount came in to Pakistan but what happened to that amount? Is it invested to any public project in the same domain? The answer is simply no, if govt or regulator cannot ensure the proper usage of the money they need not sale any national asset. These precious assets are built by tax money of people of Pakistan and no govt should be allowed to throw away them just to get money without any future plan.
The author is a telecom consultant. He has worked for various telecom companies. Courtesy: More Magazine