Pakistan is striving hard to enlist itself in the countries where technologies drive policies, services meet consumer expectations and regulations facilitate innovations. However, a Pew Global Attitude Survey in 2014 did not conform to this claim by the Pakistan Telecommunication Authority’s (PTA) Annual Report of 2016 which holds very encouraging figures of a technologically advancing Pakistan.
The Survey told that in our country, just eight per cent of our population had access to the internet which was then worse than all the 32 participating developing countries with Bangladesh at eleven and Uganda at fifteen per cent. This technological advancement is being sought in a country where only twelve (12%) of our people have desktop/laptop computers at home.
The PTA’s Annual Report 2016 contradicts its Latest Indicators Report of March 2016 which stated that the total number of mobile phone users were at 131 million. The report now claims bigger as it states that 91 percent of our population owns a mobile phone. Out of our 182 million people, 91 percent means that 165 million of them own a mobile phone. The March 2016 report stated that the mobile phone owners are increasing at a rate of 0.9 per cent. At that rate, the increase should be 1.17 million a month but the 91 percent figure can only be achieved if 5.6 million new mobile phone owners are added monthly.
If to please the readers, the figures given in the annual report are accepted, the mobile phone sales data does not conform to the claims as well. In fact, mobile phone imports declined over 15 percent in the first quarter of the current financial year as compared to the same period of last year. Pakistan Bureau of Statistics (PBS) released the import data of mobile phones earlier this week. The data shows that total imports of mobile phone stood at $146,562 in the first quarter of the current fiscal year 2016-17 against $172,860 during the same period of last financial year. This shows a sharp drop in mobile phone sales. Another proof that rejects the PTA’s claim of 165 million mobile phone owners in Pakistan.
The same report says that Tele-density in Pakistan at the end of June 2016 was 70.9 percent. It again contradicts the PTA’s claim that 91 per cent of the countrymen owns a mobile phone. A June 2014 report of the Economic Survey of Pakistan stated that teledensity in the country was at 78 per cent and now the PTA’s annual report of 2016 shows that it is 70.9 per cent. PTCL annual report of 2015 claimed that its subscribers were 26 million at that time, while the annual PTA report of 2016 claims that fixed line users are just 1.5 per cent of the total subscribers.
Financial Year 2013-14 was the healthiest year in telecom industry because of the 3G-4G mobile spectrum auctions with total telecom revenue of Rs. 463.5 billion. In the year 2015, the revenue was dropped to Rs. 446.2 billion but the recent PTA report gives a healthy figure of Rs. 452.8 billion showing that telecom sector is growing at a rapid pace. Telecom sector is also contributing profoundly to the national exchequer. In 2014 it contributed 60.12 billion rupees in GST, 104.6 billion in PTA deposits and 79.16 billion in other heads, today it contributes 41.65, 34.1 and 82 billion rupees in these heads respectively.
The dooming side to this sector is an investment that has dropped heavily since last 2 years. In the year 2013-14 the investment that came in this sector was 1789.7 million US dollars which dropped to 978 million $ in 2015. This year it has touched a trough of 659.4 million dollars. Experts are of the view that the major reason for this decline in investment is none other than the heavy taxes that are hurting the investors badly. They also criticized the PTA for not posting the actual amount of tax paid by the sector is a clear way. The sector in FY 2016 has paid Rs105.92 billion in duties, taxes, and levies to the national exchequer. To deceive the readers, PTA officials have camouflaged the tax head to “other” in their annual report. Umer Saqib, country manager of transmission planning in Ufone is of the view that if the tax bombardment to this growing sector would continue at a similar pace, the possible upcoming investment in the sector would cease.
The report although compared all heads with the performance of the sector in previous years but it tried to pelt the Foreign Direct Investment (FDI) by giving no comparison of the previous years. If compared with the available data, FDI in 2014 was US $423.8 million. In 2015 it dropped to a level of 120.8 million which is now at 210.4 million US $. After the Mobilink-Warid merger, PMCL is leading by retaining 37 percent of the cellular mobile phone subscribers, Telenor 29 per cent, Zong (CMPak) 19pc and Ufone(PTML) is holding 15 per cent of the total cellular mobile subscribers.
As the 3G/4G internet services are available and fast expanding their geographical coverage, the subscriptions to Mobile Broadband (MBB) have increased considerably. In 2013-14 only 3.8 percent of the Cellular Mobile Subscribers (CMS) were using mobile internet services. In 2015 the subscriptions were increased to 16.89 percent. FY2016 saw a double increase in the number of MBB subscriptions which are expected to reach at a level of 30 percent in December 2016. But this 30 million is just 15.32 percent of the total mobile phone subscribers which shows that MBB has still a huge potential.
The growth of MBB is directly proportional to a number of in-use smartphones in Pakistan. Recent PTA reports again pigskins the relevant data regarding the smartphone penetration although the same was a part of its previous year report. An earlier PTA report said that by the end of 2016 the number of in-use smartphones in Pakistan would reach a figure of 40 million. By this, the PTA means that smartphone penetration in the country shall reach a mark of 25 percent which makes it 40 million of the total 165 million mobile phone subscribers. Out of them, 15.32 percent smartphone owners are only subscribed to MBB. With this little subscription, the sector, however, managed to earn revenue of 92,824 million rupees the report states.
The report gives a complete insight into the social media and app usage as well. It states that 2.5 million subscribers use facebook , 0.2 Instagram, 0.07 Twitter, 0.45 Whatsapp, 0.23 Viber,0.20 Skype, 0.57 Youtube, 0.44 Facebook Video, 0.08 DailyMotion, 0.01 Candy Crush, 0.01 Xbox Live and 0.003 million use PlayStation network.
As far as the service quality is concerned, the operators received 38,741 complaints in total out of them 99.6 percent were resolved. Zong having 19 percent share of the market received 23 percent of the total CMOS complaints. This is equivalent to Mobilink having 37 percent of the market share. The data, therefore, hints towards the reason hindering Zong in grabbing more customers from the jam-packed cellular market i-e service quality. Telenor27 percent, Ufone 19 percent, and Warid received 8 percent of the total CMOS complaints.
Factors such as price, brand image, service or network quality, value added services and promotional activities continue to be the decisive factors in customer retention and switching. The government in its thirst to collect maximum tax from the sector is killing it indirectly. At present, it is collecting Rs. 40 billion illegal withholding tax from the CMOS customers. This tax is directly affecting the end user and is a major road block in services and subscription expansion.
The tax policy in not uniform as well. It seems that the government imposes taxes not on the basis of a tax policy but on the basis of sector growth. For landline customers, there is no tax except from initial 1000 usage but in the case of mobile subscribers, this tax is being deducted on the recharge of every 100 rupees. The government must not tax those mobile phone subscribers who do not fall into the tax bracket according to FBR data. At present GST and WHT rates on telecom services are up to 19.5% and 14% respectively compared to average GST of 16% and WHT of 10% in other sectors.
Although the FBR acknowledges the annual tax certificate issued by CMOS but that is irrelevant for those 98.78 percent Pakistanis who are not tax payers. 55 percent Pakistanis fall below the poverty line and 27 percent are at an income level which hardly enables them to meet their basic needs. Collecting WHT from all of them is a grave injustice. As they will neither get a refund through FBR nor from the government on the taxes they pay on their mobile phone bills and recharge. On average, if a person spends 1000 rupees on his/her cellular service, 442 are gone to the government in the lieu of heavy taxes.
The customs duty which was at 0 percent in 2010 is at 15 percent now. Such increase will never help in the sector growth when present companies are trying to import the latest equipment to upgrade their infrastructure and services in Pakistan.
Are we planning to kill the Golden Hen?
The question remains.
