Telecom troubles

While over 91 per cent of the country now has access to cellular services and broadband subscribers have increased by around 14 million people, things are still looking tough for the country’s telecoms sector. According to the PTA’s annual report for the 2023-24 fiscal year, foreign investment in the local telecom sector has been declining despite the jump in broadband subscribers and access to cellular services. Total FDI to the telecom sector came in at $46 million in FY2023-24, an over 20 per cent decline from the previous fiscal which saw $58 million in FDI. The dollar inflow in FDI was also less than the dollar outflow, which reached around $90 million, in 2023-24. However, the dollar outflows were even higher in 2022-23, ranging around $280 million. The telecom sector’s overall investment also declined by $5 million to $765 million in 2023-24. And while the overall number of mobile subscribers might have grown, average revenue per user has declined in dollar terms compared to other comparable countries. The challenges in terms of attracting foreign investment and lifting revenues per user could prove to be particularly problematic as the country and the world begin the transition to 5G mobile networks.

This transition will require substantial investments in terms of upgrading existing networks and expanding infrastructure, imposing a significant financial burden on Pakistan’s telecom operators. There is also the country’s digital divide to consider, with the growth in telecom services thus far having been highly uneven when one compares urban and rural areas. The former has generally seen higher and faster adoption of new telecom technologies than the latter. The PTA report notes that the digital divide also constitutes a significant barrier to the country’s 5G rollout, with rural and/or remote areas at a higher risk of missing out due to the steep costs and logistical challenges involved in bringing 5G to areas where the population is relatively lower and poorer and there is less developed infrastructure. These challenges will likely only grow with time given the rapid rate of urban migration in the country. However, even bringing 5G to urban areas will probably not be smooth sailing. Those who recall the 4G rollout will remember that Pakistan was quite late in adopting this standard and was stuck at 3G while other countries surged ahead.

As things stand, it is unclear if telecom operators will be able to find the capital to ensure that the adoption of 5G goes better and where this capital will come from. Without growing FDI and declining or stagnant overall investment, raising prices for existing consumers might seem like the most obvious course, but this will be tricky since customers have become used to rates that are relatively cheaper in global terms and the increasing price sensitivity among people after years of brutal inflation. The decline in FDI for the telecom sector should also worry government officials and urge them to reflect on where telecom policy has gone wrong and what can be done to restore investor confidence. For a start, a country where the internet is prone to hours- or even days-long disruptions, access to social media platforms is restricted, internet speeds are slow and one always has to be wary of what state officials might think of some type of digital content is not exactly an attractive investment. While security and political stability are important concerns, they should not come at the expense of a vibrant and financially successful digital landscape.