Telecom operators plead with one voice computer parts and gadgets are essential goods, not luxury Items
Our Staff Reporter
ISLAMABAD: Telecom and IT industries have pleaded with the State Bank of Pakistan (SBP) to reverse 100 percent cash margins on the import of nearly all those critically-important equipment that could not be procured domestically.
A 100 percent cash margin requirement means telecom operators must deposit the total dollar amount of the transaction value with their banks before the opening of letters of credit.
The State Bank of Pakistan (SBP) on April 7, 2022 slapped a 100 percent cash margin on the import of additional 177 products to limit the imports of “luxury” items to help bridge a trade gap that was widening like anything.
These items include cellular mobile phones, main telecom equipment, telecom parts, hard disks, servers, routers, power equipment, lithium batteries and others.
All the telecom operators including PTCL & Ufone, Jazz, and Telenor Pakistan wrote a joint letter to the SBP and Ministry of IT and warned that this decision could jeopardise the existing telecom network infrastructure as well as its expansion, modernisation, and deployment.
“This extension of the list to include telecom equipment is extremely detrimental to the industry and its overall service provision to the masses across Pakistan, as per licences granted to us by the PTA (Pakistan Telecommunication Authority),” the letter said.
“Nearly 85 to 90 percent of imported telecom equipment now falls under this new circular and therefore it will have severely adverse impacts on the liquidity situation as well as the funding requirements for telecom companies.”
The stakeholders said the telecom sector was totally import-dependent for its equipment to deliver quality service and meet its network coverage expansion obligations, as mandated by respective licences.
“The telecom equipment is neither a luxury nor is it manufactured locally; therefore telecoms do not have any option other than to import all such equipment for their network upgradation and expansion as well as to maintain the quality of service requirements,” they argued in the letter.
“Telecom companies are not cash-rich and their funding plans are based on the overall cash cycles where vendor payments are assumed as per the contract credit terms. With the sudden and immediate change in regulatory requirements, the cash outflow, which was supposed to happen on a future date, has to be made immediately (upfront to banks as cash margin) that has a direct impact on the liquidity and financial health of the companies.”
They said in order to comply with the cash margin requirement of SBP, the telecom companies would be compelled to either reduce their network expansion plans or obtain new financing from banks, which was a time-taking process and would require a completely different plan of expansion and investment.
“This will have a direct impact on the Telecom Capex Rollout Plans for the year, which include telecom network capacity enhancements to increase telecom services penetration and modernisation (in terms of latest technologies) as well as the upgrade of BTS sites from 2G to 3G/4G technology for increasing Mobile Broadband Proliferation in the country.”
This, they said, would further lead to inability of the telecom industry in delivering the service obligations as mandated by the regulator.
“This new list not only adversely impacts the telecom industry but also defies the ‘Ease of doing Business’ goals of the government. It will also create hurdles in expanding the Digital Pakistan agenda of the government.” This would also significantly increase the cost of doing business and force the operators to pass on the costs to consumers.
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