SPECIAL REPORT ISLAMABAD: Telecom operators seem cautious to tighten their belts for Capital Expenditures (Capex) and Operational Expenditures (Opex) in Pakistan as foreign direct investment (FDI) has continued to drop by 39 percent in the first half of the current fiscal year 2010-11.
“The local telecom companies received $111.2 million FDI in the first half of current fiscal year as compared with $181.7 million recorded in the corresponding period of last fiscal year,” shows quarterly report of the State Bank of Pakistan.
According to it, $60 million FDI was received in September 2010 by single mobile telephony company. Besides Qubee a broadband operator invested $35 million in an estimate.
The major part of this investment was made on the revamping and repair work of infrastructure damaged by floods in July and August last year. More than 3104 BTS sites of cellular operators’ were damaged as reported by PTA.
The SBP report said that telecom operators witnessed $16.8 million negative reinvestment of their earnings during July-Nov 2010, which shows losses to some operators in the sector.
A sum of $908.8 million had been invested in 2009-10 while during the corresponding period it was $1,229.5 million. However, the cellular revenue continued to increase, as it was Rs 89,896 million in 2005-06 and Rs 236,047 million this year.
The telecom operators particularly in the cellular sector had announced to invest big amounts in the beginning of 2010, however, they have failed to materialize it so far, apparently because their expenses were restricted outside the country.
According to an official of PTA, Mobilink and Zong managements had announced in April of last year to invest $250 million and $300 million respectively in 2010 to expand their infrastructure and service quality in operating country.
“Cellular operators added a total of 4.8 million subscribers to their networks during 2009-10. A drop of 24 per cent in net addition is observed since last year,” says a PTA report on cellular companies’ growth.
It said that Ufone and Warid, in an attempt to achieve correct active subscriber figures, reported a loss of 455,607 and 955,049 subscribers respectively during this period while Mobilink, Telenor and Zong added new subscribers to their networks.
“The mobile industry has been seeing a drop in average revenue per unit (ARPU) for the last couple of years due to the fact that initially operators are adjusting to amplified fixed investments,” the PTA official noted.
Telecom analysts say that cellular phone companies have started curtailing FDI for the last couple of years due to the decline in service sales and revenues following the impact of global financial crisis on the economy of operative countries.
However, they have been avoiding landing FDI in Pakistan despite they have announced many projects and business deals in the country.
According to them, the bad state of affairs being run by the government and bureaucrats in the Ministry of IT and Telecom has severely impacted the conducive environment for foreign investments in the country. They opined that sustained and encouraging policies must be pursued to allow the FDI swell.
http://www.technologytimes.pk/mag/2011/feb11/issue04/fdi_in_pakistan_telecom.php
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