PTA to Change the LDI License Tariff Due to Rupee’s Devaluation and High Interest Rate

Pakistan Telecommunication Authority (PTA) is planning to revise the Long Distance & International (LDI) license template, on account of various challenges including the devaluation of local currency and high interest rates which are exerting pressure on capital and operating costs for the telecom sector and impacting the business cases and profit margins of the industry.

The Authority under section 5 (2) (a) of the Pakistan Telecommunication (Re-organization) Act, 1996 (the “Act”) is empowered to grant and renew licenses for any telecommunication system and any telecommunication service on payment of such fees as it may, from time to time specify.

In accordance with section 20 of the Act, no person shall establish, maintain, or operate any telecommunication system or provide any telecommunication service unless he has obtained a license under the Act. Further, section 21 (4) (g) elaborates “Exclusive Power of the Authority to grant licenses”, that every license granted under the Act may contain obligations to provide telecommunication service to particular persons or areas to meet minimum standards for quality and grade of services requirements.

Furthermore, section 21 (4) (n) elaborates “Exclusive Power of the Authority to grant licenses”, that every license granted under the Act may contain conditions as to the security provided by a licensee to support the fulfillment of the licensee’s obligations in the license, and the realization on such security by the Authority.

By virtue of the mandate provided in the Act, the Authority in 2022 revised and issued an updated Long Distance & International (LDI) license template.

The Authority after carrying out consultation with all the stakeholders imposed a roll-out obligation in terms of deployment of 1500kms with submission of Performance Bank Guarantee (PBG).

PTA stated that the telecom market in Pakistan is currently navigating a transformed business landscape characterized by various challenges. Considering multifarious financial implications with specific reference to the currency devaluation which has also exerted pressure on capital & operating costs for the telecom sector, impacting the business cases & profit margins of the telecom industry and in particular telecom licensees.

The interest (policy) rate, set to manage inflation, has remained high, adding financial strain to businesses operating in the telecom sector. The resulting increased cost of doing business, and considering the concerns raised by the telecom Licensees, the Authority has decided to carry out another consultation in order to examine the concerns of relevant stakeholders with regard to LDI license conditions related to 3.2 – Network Rollout Obligations and 3.3 – Security for Performance.

Besides the challenges, the Authority is also acutely aware of the need for the proliferation of OFC networks and the need for expansion and enhancement of a resilient fixed-line network to support the growing demands of the telecom sector. Thus, 1500 x kms of OFC ownership was mandated for licensees in the LDI License Template (2022).

Accordingly, 5 x new LDI licenses have been approved by the Authority in 2023, and currently, no LDI License application is pending at PTA.

Considering the above background and the concerns raised by some of the licensees regarding the LDI license template, the issues are summarized as follows to carry out consultation with all the relevant stakeholders:

Issues for Consultation
  1. Linkage of Performance Bank Guarantee (PBG) to roll out an obligation of laying 1500 Km OFC or Gateway Earth Station, in addition to PoP/Switching Offices and NCP in each Telecom Region
  2. Rollout modalities/methodology for laying of 1500 KMs OFC
  3. Addition of any other “Technical & Financial Plan” as an option under clause 3.2.6 of LDI License.

A fresh consultation is being carried out to evaluate the existing license template, PTA added.

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