Amid challenging operational conditions such as forex volatility and inflation, policymakers are urged to take several measures to reduce currency risks and create stability in business planning. These measures include fixing and freezing the forex rate for license-fee payments, spreading out license-fee installments over ten years to alleviate cash-flow pressures, removing sales tax on affordable mobile phones, and promoting long-term planning in the telecom sector.
This is highlighted in the GSMA report titled “Realising Pakistan’s Aspiration to become a Digital Nation,” launched at the Digital Nation Summit in Islamabad. The report points out that taxes on service providers, consumer devices, and services in Pakistan are among the highest globally, which affects network investment and disproportionately impacts vulnerable populations.
The report also recommends gradually eliminating the 15% Advance Income Tax (AIT) on essential telecom services and the 19.5% sales tax on mobile services, which hinder digital inclusion for low-income households. The Pakistan Finance Bill recently introduced additional taxes on low-cost mobile handsets and an increased advance tax on telecom services for certain taxpayers. It also requires mobile network operators to disconnect services for non-compliant users. To support digital inclusion, the report suggests removing sales tax on affordable mobile phones and reducing the advance tax on telecom services.
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Pakistan plans to auction the 5G spectrum by early 2025, with mobile operators currently holding around 270 MHz of licensed spectrum. The addition of new spectrum bands is necessary for expanding network capacity and deploying 5G. However, the report emphasizes that spectrum costs in Pakistan are already high, and ARPU is declining. Therefore, a rational approach to pricing in the upcoming auction is crucial to ensure the sustainability of spectrum costs and to incentivize operators to invest in network rollout, thereby reducing the digital divide.
The report also highlights the risks of denominating spectrum costs in US dollars, given the local currency’s depreciation. It suggests that spectrum payments be denominated in local currency to provide greater certainty for operators. Moreover, the report calls for a smartphone financing framework to improve access to smartphones, particularly for lower-income groups. Although Pakistan’s government has introduced a smartphone financing policy, more needs to be done to increase smartphone adoption and affordability across all regions.
The report also critiques the impact of service restrictions, such as those imposed during certain events, arguing that they violate individual rights and harm citizens’ health, education, and economic welfare. The government is encouraged to support initiatives like “Always-on Network Service” (AONS), which allows business-critical mobile applications to remain accessible during data restrictions. This initiative, developed by GSMA and mobile operators in Pakistan, has proven successful in trials, including during network shutdowns.
