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Undue taxes suppress cellcos’ ARPUs

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KARACHI: Excessive taxes on cellular services have been suppressing Cellular Mobile Operators’ (CMOs) Average Revenue per Users (ARPUs) gradually which might lead exit some of the operators especially due to anticipated slow Return on Investment (RoI) on next generation technologies by CMOs.Recently Pakistan’s top mobile operators attributing their regularly declining ARPU to undue additional taxes as Mobilink, leading mobile operator in Pakistan since its inception on Thursday in its first quarter 2014 financial results’ report said its ARPU declined 12 percent Year on Year (YoY) to Rs 216, negatively impacted by the implementation of the additional withholding taxes and lower interconnect revenue, important to mention ARPU of Mobilink was Rs 244 at the end of first quarter 2013.Similarly Telenor Pakistan’s ARPU in first quarter 2014 decreased by 6 percent to Rs 183.01 from Rs 199.64 in same quarter of 2013 due to continued intense on-net competition and subscriber growth in lower revenue generating segments, Company said.ARPU for postpaid users of Telenor decreased to Rs 582 in first quarter 2014 while it was Rs 699 in fourth quarter of 2013. However, in first quarter 2014, controversial call set-up charges bore fruit for Telenor Pakistan as the Company’s revenues increased by 5.4 percent to Rs 23.68 billion during January to April 2014 against Rs 22.40 billion in corresponding period of 2013. Telenor said in its financial report that revenues increased driven by strong subscriber growth and uptake in data revenues in addition to introduction of call set-up charges and increased surcharge on refills.Pakistan Telecommunication Authority (PTA) had already issued several instructions to all CMOs to immediately stop call set-up fee imposed by them in January 2014. However, paying no heed to the regulator’s directions, none of the CMOs stopped charging the call set-up fee as they termed Pakistan Telecommunication Authority has no authority to regulate the tariffs’ related issues after deregulation in 2004.VimpelCom a parent company of Mobilink Pakistan in its financial report said Africa and Asia business unit was impacted by regulatory and governmental actions in several countries. As a consequence, Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) declined organically 3 percent YoY to $399 million mainly due to government and regulatory actions and the macro economic slow down in Pakistan.Mobilink’s revenue decreased 5 percent YoY, adversely affected by a macro-economic slowdown, lower voice revenue following the implementation of additional withholding taxes and strong competition coupled with lower interconnect revenue, report added.Mobilink’s mobile customer base increased 5percent YoY to 38.2 million, supported by attractive on-net offerings, reactivation campaigns and attractive bonus on recharge offers as well as new tariff plans.Mobilink’s EBITDA decreased 11 percent YoY with the revenue decline being partly mitigated by cost efficiencies, particularly in content costs and interconnect costs.Capital Expenditures (CAPEX) increased 509 percent YoY due to the network modernisation project, which is expected to be completed by the end of second quarter 2014.On April 23, 2014 Mobilink was awarded 2x10 MHz spectrum in the 2100 MHz band for a price of $301 million. The license shall be valid for 15 years. This milestone paves the way to launch 3G services in Pakistan during 2014 and solidifies the Group’s commitment to the Pakistani market and to maintaining Mobilink’s market leadership position, report said.

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