Telcos seek ‘industrial power tariff’: Investment in 5G networks, AI-ready data centres at risk

ISLAMABAD: Pakistan’s major telecom operators have sought the government’s intervention to extend the industrial electricity tariff to licensed telecommunications infrastructure, arguing that rising power costs are undermining investment in 5G networks, fibre connectivity and artificial intelligence (AI)-ready data centres.

In a joint letter to the Prime Minister, Shehbaz Sharif, the Chief Executive Officers(CEOs) of Jazz, CMPak (Zong), PTMIL (Ufone and Telenor) and PTCL maintained that the telecom sector had repeatedly been recognised as an industry under government policies and legislation, but continued to be denied industrial electricity tariff treatment.

The operators stated that the industry had committed $2 billion in investment over the next three years to deploy 5G network infrastructure and expand fibreisation. They are also investing in AI-ready, Tier-III data centre infrastructure to meet the growing computing and connectivity requirements of Pakistan’s digital economy.

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They argued that the continued application of commercial electricity tariffs to telecom infrastructure was becoming increasingly unsustainable as power consumption rises with the deployment of 5G technology and AI-enabled services.

According to the operators, the difference between commercial and industrial electricity rates directly affects the viability of investments that the government has encouraged under its Digital Nation Pakistan vision.

The telecom operators contended that the classification of telecommunications as an industrial undertaking was supported by existing policy and law.

They cited the Mobile Cellular Policy, 2004, and a subsequent notification issued by the Ministry of Industries and Production on April 20, 2004, which, according to the industry, classified telecommunications as an industry.

They also referred to the Finance Act, 2021, which amended Section 2(29C) of the Income Tax Ordinance to expressly include Pakistan Telecommunication Authority (PTA)-licensed telecom operators within the definition of an industrial undertaking for tax purposes.

The operators further cited a precedent set by the National Electric Power Regulatory Authority (NEPRA), which extended the industrial tariff to dairy and poultry farms on November 9, 2018. They argued that the telecom sector had an equally strong, if not stronger, claim to industrial classification.

The industry also highlighted the policy directive issued by the Ministry of Information Technology and Telecommunication on January 6, 2026, concerning the auction of International Mobile Telecommunications (IMT) spectrum. Under paragraph (n)(vii) of the directive, a joint task force comprising the Ministry of IT and Telecommunication, Power Division, NEPRA, PTA, telecom operators and distribution companies (DISCOs) was to examine and implement an industrial power tariff for the telecom sector, alongside smart-grid solutions and dedicated power feeders to address prolonged electricity outages.

According to the operators, the task force was subsequently constituted and held its first meeting on August 4, 2026, under the chairmanship of the Special Secretary, Ministry of IT and Telecommunication, with the relevant government bodies, DISCOs and telecom industry representatives in attendance.

The operators have now sought a policy decision to translate this initiative into a revised electricity tariff arrangement.

The telecom companies stated that commercial electricity tariffs applicable to telecom sites had increased by approximately 197% since 2018, while fuel costs had risen by around 300%. In contrast, average revenue per user (ARPU) had declined by approximately 22% over the same period, alongside a further 5% withholding tax burden.

They warned that the growing electricity cost burden would intensify as 5G traffic expands and AI-enabled services increase the power requirements of telecom networks and data centres.

According to the operators, extending the industrial tariff to data centres, switching centres and cellular towers would reduce operating expenses and allow the resulting savings to be redirected towards 5G deployment, rural connectivity and fibre network expansion. The industry maintained that such a measure would support the government’s digital transformation objectives while improving the financial sustainability of telecom operations.

The telecom companies also argued that tariff rationalisation could benefit DISCOs by encouraging operators to rely more heavily on the national electricity grid. They stated that prohibitive commercial tariffs had encouraged the solarisation of telecom towers and data centre operations, resulting in a gradual shift away from grid electricity.

According to their projections, extending industrial rates to eligible telecom infrastructure could reduce the growth of solar off-grid operations from 15% to 5-7%, while increasing grid utilisation by an estimated 15-20%.

The operators argued that higher grid consumption would help offset potential revenue losses for DISCOs over two to three years. They maintained that any near-term financial impact on distribution companies could be balanced by increased reliance on grid electricity and improved utilisation of existing capacity.

These figures represent the industry’s projections and have not been independently verified.

To address concerns about the possible extension of industrial tariffs to premises unrelated to telecom network operations, the operators proposed a strict eligibility framework certified by the PTA. Eligible infrastructure would include core hub sites, base transceiver stations (BTS), cellular towers, mobile switching centres (MSCs), exchanges, AI and cloud data centres, fibre-to-the-home (FTTH) nodes and network operating centres (NOCs).

Corporate administrative offices, customer service centres, franchises and retail outlets would remain excluded from the proposed tariff arrangement.

The operators also pledged that savings generated through electricity tariff rationalisation would be reinvested directly into 5G network expansion, rural connectivity and FTTH fibreisation.

They said the proposed safeguards would ensure that the benefit remained confined to essential telecommunications infrastructure rather than extending to the companies’ broader commercial operations. The telecom operators have requested the government to issue a policy directive extending the industrial electricity tariff to the telecommunications infrastructure sector.

Alternatively, where reclassification under the existing tariff framework requires a separate regulatory process, they have proposed the creation of a dedicated “Digital/Telecom Infrastructure” consumer category carrying industrial electricity rates.

They have also called for directions to DISCOs to implement the revised tariff category within a clearly defined timeframe. The operators said they remained committed to working with the government and relevant regulatory authorities to implement the proposed reform, which they described as important for accelerating digital infrastructure investment and advancing Pakistan’s broader digital economy objectives.

Copyright Business Recorder, 2026