Rupee devaluation hits telecom sector hard

February 03, 2023

ISLAMABAD: Pakistan’s telecom sector has raised concerns over payments of license fees and interest on installments for pegging to the US dollar, declaring that massive devaluation of the currency had jeopardised their business plan.

The telecom players and their chief executives protested through tweets on Thursday. CEO Jazz Aamir Ibrahim stated that the Pak rupee devaluation had jeopardised the business case for telecom companies as their license fees and interest on installments were pegged to the US dollar.

“Last year, 50 percent license renewal fee cost us Rs44.5 billion and this year just 10 percent installments alone costs over Rs13 billion,” he added.

The CEO Telenor, Irfan Wahab, in a tweet on Thursday stated that while the telecom sector generates its revenues in Pak rupees, renewal and installments are priced in US dollar, exposing telecos to massive currency devaluation risk. “Need to fix this mismatch before telecos capacity to further power Ibrahim stated that the Pak rupee devaluation had jeopardised the business case for telecom companies as their license fees and interest on installments were pegged to the US dollar.

“Last year, 50 percent license renewal fee cost us Rs44.5 billion and this year just 10 percent installments alone costs over Rs13 billion,” he added.

The CEO Telenor, Irfan Wahab, in a tweet on Thursday stated that while the telecom sector generates its revenues in Pak rupees, renewal and installments are priced in US dollar, exposing telecos to massive currency devaluation risk. “Need to fix this mismatch before telecos capacity to further power digital transformation gets irrevocably depleted.”

Hatem Bamatraf, CEO PTCL, stated in his tweet that with constant devaluation of Pak rupees against US dollar, the cost of doing business has significantly increased in the country. The expectation from telecos to invest heavily in infrastructure modernisation while earning in rupee is becoming detrimental to the dream of digital Pakistan.

In a background discussion, the telecom sector sources said that last year for renewal of license, the Jazz company had to repay $486 million out of which 50 percent was paid. With the exchange rate that prevailed at that time, they had paid Rs44.5 billion. Now for 10 percent repayment in January 2023, the company paid Rs13.5 billion because of the increased devaluation.

Now the devaluation has further occurred and they are asking that how much they had to repay in the next installment, so making a business plan had simply become impossible for them. They stated that a huge concern, which has remained unaddressed, is that all spectrum auctions, and renewals and installments to be paid on them are priced in US dollars while the revenue generated is in Pakistani rupees. This mismatch has made it impossible to project, develop and deliver on sound business plans. Denominating spectrum costs in dollar also exposes the operators to massive currency devaluation risks. For instance, three operators paid $291 million each for telecom licences in 2004-05 but the same were renewed at 55% higher price of $450 million in 2019. In rupee terms, the increase was 360% from Rs16 billion to Rs74 billion, respectively.