ISLAMABAD: It was a tough year for the IT sector, with telecom operators and users taking the brunt, especially after a change of government in April and the belt-tightening that followed.

Call and internet rates jumped and yet the service quality worsened and speeds slowed in 2022. Network outages intensified thanks to ‘connectivity load-shedding’ in the wake of hours-long power outages and rising fuel costs.

Among the few silver linings was the cloud-first policy introduced in February that sought to shift federal public service entities away from on-premise infrastructure.

However, after hitting that cloud, the ministry asked for the moon when it set a $5 billion export target for IT exports, a figure stakeholders say seems to be anything but achievable.

One bright spot in the otherwise gloom-ridden IT landscape was the export of 120,000 mobile phone sets to various markets in the Middle East and Africa.

Telcos took the brunt in 2022 as rates jumped and service quality worsened

However, the CEO of Inovi Telecom, the company that shipped the consignment last month, said such one-time big-ticket orders wouldn’t work and stressed that regular export orders were essential for the sector’s growth.

To put it in context, out of the 31 mobile phone-making licence holders in Pakistan, Inovi is the only local company to have exported mobile sets.

Its CEO, Zeeshan Mian Noor, told Dawn that the mobile industry had been given a quota of letters of credit (LCs) amounting to $83 million a year to import key components for mobile phone set assembly.

However, “the fact is that raw material worth $185m is required to meet the demand for mobile sets in the Pakistani market”, he said, adding that exporting phones was a distant dream when manufacturers were unable to meet the demand from local buyers.

Telecom trouble

The telecom industry said it was the worst hit in 2022 as operating expenses jumped by around 20 per cent year-on-year, whereas the growth of the industry’s revenue failed to hit even double digits.

The sector has repeatedly insisted that Pakistan has one of the highest levels of taxation, interest rates and the rupee’s devaluation. All this, coupled with increased energy costs, resulted in more than Rs100 billion in unbudgeted costs for the industry in the outgoing year, it said.

With power outages of up to 12 hours a day in some parts of the country and the sharp increase in diesel rates that run the companies’ generators, large parts of the country lack network coverage during power outages.

“Diesel-run generators as well as the capacity of batteries at the towers were designed for two to three hours of outages,” Jazz CEO Aamir Ibrahim told Dawn.

He regretted that the average revenue per user (ARPU), a key tool to measure the financial health of cellular mobile operators, had fallen to less than a dollar from $9 in 2003-04 when only 2G services were available.

For each mobile call, Pakistanis pay 34.5pc taxes, including 15pc withholding tax and 19.5pc general sales tax. The increase in taxes by the incumbent government has led to higher calls and internet rates, reducing consumption and further declining the companies’ revenues.

On the other hand, consumers face a significant increase in “call latency and black holes in the networks”, where the calls or internet either slows or drops.

Telecom companies blame the government for not implementing the right policies and postponing the planned spectrum auction.

Telenor Pakistan CEO Irfan Wahab Khan said the country required more spectrum to improve the quality of service of the telecom sector, and the government should come up with the right kind of terms and conditions, including pricing.

IT exports

At the same time, due to several restrictions imposed by the central bank, the IT exports and the performance of the freelancers suffered, and the $5bn IT exports target for the current fiscal year seems unachievable.

Barkan Saeed, a former chairman of P@SHA, said exports of IT and IT-enabled services could only reach $2.6bn in the 2021-22 fiscal year against the $3.5bn target. “This year, even that figure seems difficult only due to inconsistent policies,” he said.

IT Minister Syed Aminul Haque acknowledged issues faced by the sector. Talking to Dawn, he said the IT sector needed “special attention, as it was not a standalone service or industry but a catalyst that could give a boost to all sectors through digitisation.

However, he added that the performance of his ministry “surpassed the output of other ministries” in 2022.

“The year had been challenging for the telecom sector due to various political and economic constraints, but all the four telcos in the country have continued to serve the public without passing on the complete rising cost of business,” Mr Haque said.

He highlighted that to provide telecom services to small towns and even the outskirts of major cities, significant progress has been made by the Universal Services Fund (USF), providing connectivity to around 4.5 million people.Among the achievement of the IT ministry, significant progress was made on the regulatory side as well, including approval of the country’s cloud-first policy.

Besides, the Personal Data Protection Bill and Digital Pakistan Policy, 2023, are with the cabinet for approval, and the artificial intelligence and freelancer policies are in their final stages, which are likely to boost IT support businesses in the country.

Published in Dawn, january 1st, 2023