A global organization representing the interests of mobile network operators, The GSMA has advised the Pakistani government to remove the sales tax on affordable mobile phones.

In a report titled “Realising Pakistan’s Aspiration to become a Digital Nation,” the GSMA stated that taxes on service providers, consumer devices, and services in Pakistan are among the highest in the world.

These high taxes, which include a 15% Advance Income Tax (AIT) on essential telecom services and a 19.5% sales tax on mobile services, create barriers to digital inclusion for low-income households.

To mitigate the potential harm to digital inclusion and broader access, the GSMA has suggested that the sales tax on affordable mobile phones be removed. Additionally, reducing the advance tax on telecom services could encourage wider usage.

The report also highlighted the need for a rational approach to pricing the upcoming 5G spectrum auction, as the high cost of spectrum could impact network investment and affordability for consumers.

The GSMA advised the government to consider denominating spectrum payments in local currency to provide greater certainty for operators.

The service restrictions order (SRO) imposed in Pakistan has a profoundly negative impact on both citizens and businesses. The imposition of these restrictions directly violates individual rights outlined in international human rights conventions, including crucial freedoms of expression, access to information, and privacy - rights that are integral to democratic processes and elections.

Furthermore, the GSMA urged the government to support initiatives like “Always-on Network Service” (AONS), which enables accessibility for business-critical mobile applications even during network shutdowns.

Pakistan is planning a 5G spectrum auction to be completed by early 2025. Mobile operators currently have around 270 MHz of licensed spectrum, and the addition of new bands like 700 MHz, 2.3 GHz, 2.6 GHz, and 3.5 GHz is necessary to support expansion of network capacity and 5G deployment.

However, spectrum costs in Pakistan are already high, while average revenue per user (ARPU) has been declining. This presents a challenge, as a rational and sustainable approach to spectrum pricing in the upcoming auction is crucial.

A rational pricing approach is imperative to ensure the total spectrum cost is sustainable for operators. This will provide the right incentives for operators to invest in network rollout, which is necessary to deliver affordable connectivity, reduce the broadband usage gap, and bridge the digital divide in Pakistan.

Pakistan must adopt a balanced and reasoned spectrum pricing strategy for the 5G auction to support widespread and affordable 5G deployment, benefiting both operators and consumers.

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