Telenor Pakistan’s recent decision to conclude its operations in Pakistan, having sold its 100% stakes to the Pakistan Telecommunication Company Limited (PTCL), raises concerns about the trend of various telecom companies opting to exit the country. Something fundamental appears to have gone wrong, compelling businesses to cease operations in our region.
Telecom sector experts point to the overall prevailing business environment as the key factor leading to the departure of these companies from Pakistan. “It is a business venture that cannot be run based on charity. A viable business aims to earn profits, and when it shrinks, the business will not stay in such a place,” stated a telecom expert.
The expert also highlighted that Qatar Telecom and Oman Telecom had invested in World Call and Witribe, respectively, but both chose to leave the Pakistani market primarily due to a flawed regulatory regime. The government’s unwillingness to allocate frequencies even upon payment/auction of frequencies in dollars contributed to the decision.
Another expert noted that Telenor’s repeated warnings and concerns about the formidable challenges in the sector’s business environment remained unaddressed, compelling the company to wind up its operations in Pakistan.
In its Annual Report 2022, Telenor Group highlighted regulatory risk exposure, noting that its Pakistan unit continued to face arbitrary assessments and unpredictable application of tax regulations. The Federal Board of Revenue (FBR) froze Telenor Pakistan’s bank accounts last year, citing a disputed tax claim of around Rs3.5 billion. Although the company challenged the claim and later obtained a stay order, such incidents raised concerns.
Two years ago, the Inland Revenue Department, AJK, sealed multiple Telenor Pakistan network sites over a disputed tax demand, resulting in service disruption to most of the population of AJK. Subsequently, Telenor Pakistan faced a penalty of Rs50 million from the Pakistan Telecommunication Authority due to a service breakdown.
Telenor Pakistan responded that the services were not shut down by the company; instead, they were forced out of the company-operated towers and offices, without a notice period provided to inform subscribers of the service closure in advance.
In the second quarter of 2022, shares in Telenor ASA dropped after Norway’s biggest telecommunications company posted a $250 million impairment on its Pakistan operations due to a jump in funding costs and an adverse court ruling on license renewals. The challenging economic outlook, increased interest rates, energy prices, and global inflation impacted Telenor Pakistan’s prospects.
Among Telenor Group’s seven markets, Pakistan reported a heavy loss of Norwegian Krone 2,862 million last year, attributed to a high cost of business, particularly high energy costs, interest rate hikes, and dollar-denominated spectrum installments. Furthermore, Pakistan increased its corporate income tax from 29% to 33% in 2022, reaching an aggregated all-time high of 39%.
The latest quarterly report from the Telenor Group underscored risks and uncertainties, noting that its Asian markets, particularly Pakistan, are experiencing a deterioration in the political and economic situation. This may increase the risk of civil unrest, security concerns, and financial instability.
Over the years, Telenor Pakistan, along with other telecom companies, has actively advocated for policy interventions across various platforms to enhance the industry’s health and safeguard the viability of operations. Unfortunately, governments and policymakers have not heeded the industry’s warnings regarding an impending digital emergency, resulting in the departure of one of the most well-organized telecom groups globally.
Industry analysts view Telenor’s exit not as a natural market consolidation or reorganization but as a consequence of a policy environment failure that compelled a hasty departure. This situation warrants a thorough and immediate introspection to address the digital emergency.
