KARACHI: The telecom sector attracted foreign direct investment (FDI) of $81.9 million against a disinvestment of $184.9m in the corresponding period last year, said a State Bank’s recently issued report.

The improvement came on the back of rise in the number of subscribers to 3G/4G services, from 1.9m in July 2014 to 7.7m in December.

The situation further improved as the FDI in the sector rose to $126.9m during the first 11 months (July-May) of 2014-15.

“The cellular service providers have started rolling out a range of new products to their customers following the spectrum auction of 3G/4G licences in April 2014,” the report observed.

This also includes existing customers who have converted to packages offering high speed data usage, said the report, adding that at the same time the launch of 3G/4G services is also supporting the broadband services in the country.

Firms have been investing in upgrading their systems and network, which is reflected in an increase in foreign direct investment and a surge in telecom imports, said the report.

In addition, telecom imports during in the first half of FY15 grew by 21.3 per cent against a decline of 27.5pc in the corresponding period of FY14.

The government provided some relief in the budget 2015-16 by reducing the advance income tax on telecom services from the 15pc to 14pc and cutting GST/FED from 19.5pc to 18.5pc.

“The ICC World Cup 2015 could boost revenues of telecom operators as they have offered various products from real-time score updates to live streaming of cricket matches,” the SBP report said.

The key challenge for the telecom sector is the recent drive by the government to carry out biometric verification of all SIMs. This means all unverified subscribers will be blocked after the expiry of the deadline.

“In other words, companies will lose some of their customers as a result of this campaign. At the same time, this re-verification drive adds to financial burden of telecom companies. For example, instead of marketing new SIMs, telecom companies are focusing more on re-verification of existing subscribers; and this required investment to procure devices and systems used in the biometric verification,” said the report.

“The performance of PTCL also remained weak during first half of FY15. Additional cost incurred on voluntary separation sch­eme brought down the operating profits from Rs8.6 billion at end-June 2014 to Rs4.5bn by end of Dec 31, 2014,” said the SBP report.

Published in Dawn, June 30th, 2015

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