Pakistan''s mobile sector contributes around $1.8 billion (0.6 percent of the GDP) in terms of direct economic value, which is relatively low as compared to international benchmark, said GSM Association (commonly referred to as GSMA or Global System for Mobile Communications).
The GSMA in its latest report "Reforming mobile sector taxation in Pakistan: Unlocking economic and social benefits through tax reform in the mobile sector" stated that the "significant" investment is required to drive the expansion of mobile market and improve the affordability of services for consumers. In particular, a focus on expanding network coverage and investments in the quality of data services can accelerate the growth of the sector in Pakistan.
Total mobile sector revenues were $3.4 billion in 2017, equivalent to 1.1 percent of Pakistan''s GDP, while the sector contributed approximately $1.8 billion of direct economic value to Pakistan in 2017 (0.6 percent of GDP). This contribution to the GDP is relatively low compared to international benchmarks, suggesting considerable scope for expansion.
The majority of population (59.7 percent of the population, or 120 million people) in Pakistan is still unconnected to a mobile network, suggesting for significant investment to drive the expansion of mobile market and improve the affordability of services for consumers. Unique subscriber mobile penetration in Pakistan stood at 40.3 percent in 3rd quarter 2018, which is the lowest level in South Asia, maintained the report.
The mobile market in Pakistan has demonstrated significant growth over the past decade; however, a significant share of population remains unconnected to mobile services. The mobile market in Pakistan has expanded rapidly over the past decade with the number of unique subscribers increasing by 37.4 million (85.1 percent) between 2008 and 2018. The mobile sector expansion in Pakistan has been driven by significant capital expenditure by mobile operators who, on average, have made annual capital investments equivalent to around 25 percent of their revenue during the last decade.
Facilitating the growth of the mobile sector aligns with the new government''s economic objectives which are set out in the Pakistan Tehreek-e-Insaf (PTI) manifesto and the PTI Digital Policy 2018. These include achieving inclusive economic growth, creating new jobs, and transforming Pakistan into a knowledge economy. In this context, incentivising further investment to improve the availability and quality of mobile networks, as well as improving the affordability of mobile services, should become a policy priority for the government, particularly given the low level of unique mobile subscriber penetration, and a very low level of fixed broadband penetration in Pakistan (9 subscriptions per 1,000 people in 2017).
The report stated further that improvements in affordability of mobile services and devices would contribute to mobile market expansion and development of the digital economy in Pakistan for the bottom 20 percent and 40 percent income groups of Pakistani population, the total cost of mobile ownership (for both low and medium consumption baskets) is above the "1 for 2" United Nations (UN) affordability target (1 GB of data costing less than 2 percent of monthly income).
Moreover, an upfront cost of a handset represents an affordability challenge for those lower-income Pakistanis who do not have access to finance, which would enable them to pay the cost of a mobile phone in installments. The affordability of handsets in Pakistan may be impacted in near future by upcoming regulatory and tax changes.
In addition, the Device Identification Registration and Blocking System (DIRBS) recently launched by the Pakistan Telecommunication Authority (PTA) can increase the average price of a mobile phone on the Pakistani market, as legal handsets are generally more expensive than counterfeit and illegal devices unless it is mitigated by the government measures aimed at improving the affordability of handsets.
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