ISLAMABAD, June 2: The telecom sector, which has played a critical role in reviving the economy over the last few years, has reached a saturation point and its contribution to national kitty has started declining.

The Economic Survey of Pakistan 2010-11 highlighted that telecom sector contributed Rs109.1 billion to the national exchequer through taxes, licence fees and other duties, which is about Rs2.5 billion less than the previous year.

The survey said federal taxes and general sales tax collection from the telecom sector also declined, impeding the usage of telecom services due to high tax rates. The Foreign Direct Investment (FDI) in telecom sector has also seen a decline of Rs508 million despite an investment of $1.13 billion by telecom operators and vendors.

With regard to the hardship faced by the telecom operators, the survey said: “Total local loop (land line and wireless) telephone subscribers stood at 6.14 million in 2008-9 and did not show any improvement during the year rather a drop of one per cent specifically fixed line (land line) subscribers.”

The Long Distance International (LDI) operators, the survey said, were struggling. “Since the de-regulation (privatisation of PTCL) LDI industry has been trying to develop a stable business model where customer satisfaction could be achieved while keeping sizable profit margin intact.”

Due to high volumes of traffic (international and local termination of calls) being carried by the LDI companies, revenue generation has always been a highlight of LDI operation. The survey said at the time of deregulation in 2004, 14 LDI licences were awarded, of which nine companies are currently operational.

Over the penetration of the Information Communication and Technology (ICT) services, the survey put broadband penetration in Pakistan at the end of December 2010 at 0.66 per cent.

According to the survey, the revenues of telecom sector improved “steadily” in 2009-10 and witnessed 6.5 per cent growth rate. The total telecom revenues reached Rs357.7 billion in 2009-10 compared to Rs333 billion the previous year.—Our Reporter