In Pakistan, the economic landscape poses numerous challenges for the common person, evident in the shrinking finances of many families. This financial constraint forces people to reevaluate priorities and adjust their expense patterns. Despite facing persistent challenges, individuals strive to stay connected, but rising fuel and electricity costs affect communication and interaction.
Let’s take a moment to dive into the world of connectivity – and what better way to start than by exploring the dynamic realm of the Telecom industry? Before we get into this let’s pause and zoom out to capture the panoramic view of Pakistan’s telecommunications landscape. This industry has shown impressive subscriber growth in the past few years, with numbers on the rise. This growth in subscribers is predominantly responsible for the increase in Internet inclusion in the country.
However, as it reaches new heights, it’s also facing new challenges. The cost of fuel and electricity, crucial for keeping cell towers running, is climbing. This challenge might not be obvious to us as we chat and browse on our phones, but it’s affecting the industry in significant ways.
Zooming in on the present, we can see how higher fuel and electricity prices are causing headaches. With frequent power outages across the country, rural areas are hit the hardest, facing up to 14 hours of blackouts a day. Telecom towers rely on constant energy, which means more fuel is burned to keep them going. As we compare prices from January in the past to now, fuel costs have jumped 89% and electricity costs have surged 75%. This hits telecom companies hard because energy bills have always been a major part of their expenses.
For these telecom companies, customer satisfaction is a top priority. However, the continuous power breakdowns force them to spend a lot on energy just to stay operational. Balancing this financial strain is tough, especially since telecom companies are already operating on extremely thin margins. Their profits are already quite low, and even a small increase in costs can throw things off balance.
One significant challenge facing Telcos is the difficulty of passing on increased costs to end consumers. Pakistan’s Telco market struggles with relatively low average revenue per user (ARPU), averaging a mere $0.8 whereas globally, its around $8 per user. This poses a dilemma as the industry contends with the need to balance maintaining affordable services for consumers while covering escalating operational expenses due to energy cost hikes. Moreover, Pakistan is one of the highest taxed telco industries in the world. Costs are not low since all investment and equipment is in dollars while revenue is entirely in PKR. This leaves them with no choice but to consider raising their prices.
In the ever-evolving telecommunications industry, companies face the complex task of navigating the challenges in passing on costs to consumers. With a significant portion of telco users belonging to lower-income demographics, the smaller wallet size of these consumers creates a delicate balancing act. Unlike luxury brands being afforded by elites, connectivity in terms of calling and internet availability is a basic need for every person belonging to all socio-economic classes hence the challenge to make telco tariffs affordable for masses, which makes up most of the rural population of Pakistan, is a real challenge.
It’s quite clear that telecom companies are used to adapting to changes in the economy. But the ongoing economic challenges Pakistan is facing are testing Telcos’ adaptability. The country’s struggle with providing basic services like internet access highlights just how crucial these telecom services are. The challenges they face mirror the larger issues the nation is grappling with.
These challenges and resilience raises a tricky question: how to find sustainable solutions? While going green sounds great, it’s not easy or cheap in Pakistan’s context. So, the most feasible solution seems to be increasing prices. This might not sound great at first, but it’s a practical step to ensure that the telecom industry doesn’t collapse under the weight of rising costs.
