Executive not jazzed about licence renewal price hike

31 May 2019

Aamir Ibrahim, the CEO of Pakistan’s largest cellco by subscribers – Jazz – has criticised Islamabad for its handling of the company’s licence renewal process in an interview with Reuters. The executive highlighted the short time scale, pointing out that the government had had two years to draw up plans but had only settled on a price for the renewal three weeks before the 25 May deadline and had included an unexpected price increase, which the official described as ‘big shock’. Jazz and fellow cellco Telenor, which is also due to renew its licence, are currently challenging the government’s policy in the courts with the next hearing scheduled for 3 June. Islamabad set renewal fees at USD450 million apiece, an increase of more than 50% from the USD291 that the pair had expected to be charged, based on their original cost and the renewal fee paid by part state-backed rival Ufone in 2014.

The executive also disagreed with the government’s decision to charge in US dollars rather than Pakistani rupees, noting that it charges customers in the local currency and saying: ‘There is no precedent of the government offering (in dollars) any kind of a concession or a licence to a company in Pakistan selling things in Pakistan. Pricing in dollars is completely unsound.’ Exacerbating the issue, the rupee’s worth has plummeted in recent years, losing around 40% of its value against the dollar in the last 18 months, Reuters notes. The companies can expect to pay around PKR68 billion (USD450 million) for the licence renewal but, based on the 2004 exchange rate, the companies had paid around PKR17 billion for the original USD291 million licence fee.

Mr Ibrahim acknowledged the government’s financial struggles, with Islamabad having recently signed a preliminary agreement for a USD6 billion bailout from the IMF, but warned against the potential impact of squeezing businesses: ‘I understand the government is cash-strapped but what they’re trying to do is milk for short-term gain. But that, in the process, leaves the country behind.’ Imposing higher fees on cellcos would leave the companies with less to invest in infrastructure, the official explained, adding that the development of digital services is vital for the country’s efforts to modernise its economy and drive growth.