ISLAMABAD: Without urgent reforms to stabilize regulations, lower operational costs and create a more business-friendly environment, Pakistan may struggle to retain existing investors — let alone attract new ones.
This was the crux of background discussions with government officials, information technology and telecom industry experts, who added that one of the region’s highest taxation regimes are driving major multinational companies to scale down or restructure operations in Pakistan.
Additionally, shrinking profit margins, regulatory unpredictability, and a weakening investment climate have pushed firms such as Microsoft, Uber, and Telenor to reconsider their long-term presence in the country.
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Parvez Iftikhar, founding Chief Executive Officer (CEO) of Universal Service Fund (USF) and an ICT policy consultant, told Business Recorder that excessive taxation, lack of available spectrum, uncertain/unpredictable policy environment, and high input costs - including the imposition of commercial electricity rates on telecom operations- have made it difficult for multinational telcos to invest. “The existing ones are simply finding it impossible to sustain operations,” he said.
He said that 34.5 percent taxes are currently applied on the use of telecom services, including 19.5 percent GST and 15 percent withholding tax. Additionally, taxes and duties are applicable even on local smartphones, optic fibers and other imported equipment, making it even more challenging. “If telecom operators were in profit, would they be leaving?” Iftikhar asked.
Federal IT and Telecom Minister Shaza Fatima Khawaja recently cautioned that Pakistan’s long-awaited 5G rollout is at serious risk. She cited soaring sectoral costs, low ARPU, dollar-linked license fees, and the region’s highest tax burden as key factors choking the industry. With only 274 MHz of available spectrum — far below regional peers like Bangladesh with 600 MHz — Pakistan’s telecom ecosystem is struggling to remain viable.
The minister told the National Assembly Standing Committee on IT that nearly all operators are “running into losses with no profit to reinvest.”
Telenor Group in December 2024 announced the sale of its Pakistan telco operations to Pakistan Telecommunications Company Ltd (“PTCL”). The sale marks the end of Telenor’s 18-year presence in Pakistan and is part of its strategy to consolidate operations in core Asian markets.
Additional Secretary Ministry of Information Technology and Telecommunication during a parliamentary committee meeting stated that due to high expenditures and low profit, Telenor was considering leaving Pakistan.
In July 2025, Microsoft announced it would close its Pakistan office and lay off its employees. Although the government stresses that this does not amount to a full exit — with Microsoft shifting to a “partner-led, cloud-based delivery model” analysts say the move still signals deteriorating business confidence.
The decision aligns with Microsoft’s global restructuring, which includes cutting 4 percent of its workforce and pivoting toward AI and cloud services. But former Microsoft Pakistan chief called the withdrawal a sobering signal, where even global giants find it unsustainable to stay,” citing political volatility, unpredictable taxation, and currency instability”.
Uber ceased its app operations in Pakistan in April 2024, consolidating its presence under the Careem brand, but the latter also decided to suspend its Pakistan services by July 18, 2025, due to worsening economic conditions, shrinking venture capital, inflation, and declining consumer demand.
A senior Careem alumni stated: “I personally believe that Careem lost its touch in Pakistan post the Uber deal, when things started going from a ‘local first’ approach to a global approach where initiatives and decision making would take longer with a ton of approvals.”
He further added: “the entry to players like Yango and InDrive also gave both Uber and Careem tough competition, leaving them no choice but to burn more money to survive, especially when it came to ensuring a steady supply. I reckon their bets were different, and perhaps Pakistan was a priority market for them. However, Careem did an extraordinary job in laying the foundation of ride hailing in a very complex market like Pakistan, and the credit would go to Co-founder of Careem and the inspiring colleagues who put their blood and sweat in making it work.”
The scaling down of Microsoft, Uber, and Telenor reflects a broader trend of weakening investor confidence. While some companies — like Microsoft — are restructuring rather than leaving entirely, their decisions highlight the growing risks associated with operating in Pakistan’s volatile economic and regulatory environment.
Copyright Business Recorder, 2025