The license renewal saga is far from over. The licenses of Telenor Pakistan and ex-Warid (now with Jazz) had expired in May earlier this year. Gasping for cash, the government had come up with a steep renewal fee of $450 million per license in July. The telco’s took the matter to the Islamabad High Court in August. The court, asked the operators to deposit 50 percent of the fee while the matter remained pending. In September, Telenor Pakistan paid half the fee (~$225 mn) in dollars and Jazz paid in PKR (~Rs35 bn).
With “a bird in hand,” the government is looking for the rest of the payment, along with other non-tax measures, to manage its fiscal accounts per IMF expectations. In an interview with BR Research last month, the Federal Minister for the Economic Affairs Division, Hammad Azhar had sounded optimistic on the government realizing the receivables soon.
“We will most likely exceed the Rs1.2 trillion full year target for non-tax revenues. This will be thanks to higher SBP profits, privatization of two RLNG plants, and remaining payments from telecom license renewal,” he told BR Research. This optimism is echoed in official quarters that the matter will be amicably settled and the federal kitty will be made whole on this account.
But there is cause to be less sanguine, if latest statements from the parent companies of Telenor Pakistan and Jazz are any guide. The two HQs, which have been weathering headwinds from their Pakistan operations on account of a declining PKR as well as rising cost of utilities, do not seem to be in a mood to cave to the government demand of $450 million for renewal fee.
The Telenor Group had this to say about the litigation in its latest quarterly report: “Telenor Pakistan’s GSM license expired on 25 May, and the renewal fee was set to USD 449 million by Pakistan Telecommunication Authority (PTA). We claim that the renewal price should be USD 291 million, which is the same as prior renewals for other operators. In third quarter, we paid a deposit of USD 225 million of the requested license renewal fee awaiting a hearing in Islamabad High Court.”
Veon, which is the parent of Jazz, also sounded ominous in its latest report: “On 23 August 2019, the Islamabad High Court suspended the PTA’s order pending the outcome of the appeal and subject to Jazz making payment in the form of security (under protest) pending resolution of the appeal as per the options given in the PTA’s order. In September 2019, Jazz deposited 50% of the disputed license renewal fee (~USD 225 million) in order to maintain its appeal in the Islamabad High Court regarding PTA's underlying decision on the license renewal. There were no specific terms and conditions attached to the deposit.”
Bottomline is that companies are actively disputing the government’s demand of $450 million, they are in no mood to give in, and the legal system is taking its time to resolve the impasse. Meanwhile, Zong’s license expired last month and there is no official word on whether the Chinese operator has made any payment and if it has, on exactly what terms. The saga continues.