Rising costs, connectivity outages — a tough year for IT sector – Business

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

Call and internet rates have increased, yet quality of service has worsened and speeds have slowed in 2022. Network outages have intensified as a result of “connectivity dumping” in the wake of power outages lasting several hours and increased fuel costs.

Among the few bright spots was the cloud-first policy introduced in February that sought to distance federal utilities from local infrastructure.

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

One bright spot in the otherwise gloomy IT landscape was the export of 120,000 mobile phones to various markets in the Middle East and Africa.

Telecoms bear the brunt in 2022 as rates rise and service quality worsens

However, the CEO of Inovi Telecom, the company that sent the shipment last month, said such bulk orders would not work and stressed that regular export orders were essential for the sector’s growth.

To put it in context, of the 31 mobile phone manufacturing licensees in Pakistan, Inovi is the only local company that has exported mobile handsets.

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Its CEO Zeeshan Mian Noor said sunrise that the mobile industry had received a quota of letters of credit (LC) worth $83 million per year to import key components for the assembly of mobile phone handsets.

However, “the fact is that $185 million worth of raw material is needed to meet the demand for mobile handsets in the Pakistani market,” he said, adding that exporting phones was a distant dream when manufacturers could not meet demand. demand from local buyers.

Telecommunications problems

The telecommunications industry said it was the worst hit in 2022, with operating expenses rising around 20 percent year-on-year, while industry revenue growth did not even reach double digits.

The industry has repeatedly insisted that Pakistan has one of the highest levels of taxes, interest rates and devaluation of the rupee. All this, coupled with rising energy costs, has resulted in more than Rs 100 billion in unbudgeted costs for the industry in the past year, he said.

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

“The diesel generators and the capacity of the towers’ batteries were designed for two to three hours of outage,” said Jazz CEO Aamir Ibrahim. sunrise.

He lamented that average revenue per user (ARPU), a key tool for measuring the financial health of mobile operators, had fallen to less than $1 from $9 in 2003-04 when only 2G services were available.

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For every mobile call, Pakistanis pay 34.5% tax, including 15% withholding tax and 19.5% general sales tax. Tax hikes by the incumbent government have led to an increase in calls and internet charges, reducing consumption and further reducing business revenues.

On the other hand, consumers face a significant increase in “call latency and network black holes,” where calls or internet slow down or drop.

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 needed more spectrum to improve the quality of service in 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 various restrictions imposed by the central bank, IT exports and the performance of the self-employed have suffered, and the target of IT exports of 5 billion dollars for the current financial year seems unattainable.

Barkan Saeed, former chairman of [email protected], said exports of IT-enabled and IT services could only reach $2.6 billion in FY2021-22 against the target of $3.5 billion. “This year, even that figure looks difficult just because of inconsistent policies,” he said.

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IT Minister Syed Aminul Haque acknowledged the problems facing the sector. talking with sunrisesaid that the IT sector needed “special attention, as it was not an autonomous service or industry but a catalyst that could give a boost to all sectors through digitization.

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

“The year was challenging for the telecom sector due to various political and economic constraints, but the country’s four telecom companies continued to serve the public without impacting the overall increase in the cost of doing business,” Haque said.

He highlighted that in providing telecommunication services to small towns and even the outskirts of big cities, the Universal Service Fund (USF) has made significant progress, providing connectivity to about 4.5 million people. also took place on the regulatory side, including the approval of the country’s cloud policy.

Additionally, the Personal Data Protection Bill and Digital Pakistan Policy 2023 are with the Cabinet for approval, and the AI ​​and Autonomous policies are in their final stages, which is likely to boost IT support companies in the country

Posted in Dawn, January 1, 2023

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