Telecom sector fails to attract direct foreign investment

[Lahore_Real_Estate]

By Muhammad Yasir

KARACHI: Telecom sector has failed to attract handsome inflow of foreign direct investment (FDI) so far in the current fiscal year despite the announcement of multiple new projects and expansion of business.

One of the major contributors to FDI, Telecom sector’s investment has been recorded steep decline of 72 percent in the first eight months of the current financial year as majority of the foreign-based companies have been avoiding investing capital despite recovery in financial status from the global credit crunch.

The FDI in Telecom sector has declined to $205.4 million in Jul-Feb as compared to the landed investment recorded at $736.9 million in the same period of last financial year.

In the last eight years, the FDI in Telecom sector has witnessed tremendous growth with the rapid expansion of telephony services and business in the country. The sector has attracted 6.768 billion in this period which was the biggest amount comparing with the contribution of other sectors in FDI as per statistics of the Board of Investment. Financial Business was the second biggest contributor of FDI with $4.55 billion in last eight years.

In the overall FDI, the foreign-based cellular phone companies have made their lion’s share and expanded their businesses through out the country. Besides, Wireless Local Loop (WLL) and Fixed-Line operator also landed handsome FDI.

Telecom analysts say cellular phone companies have started curtailing FDI for the last couple of years due to decline in service sales and revenues following the impact of global financial crisis on the economy of operative countries.

However, they have been avoiding landing FDI in Pakistan despite they have announced many projects and business deals in the country.

The mobile banking and Internet services of cellular phone companies have failed to attract FDI in the country, however, all the big operators have introduced various services in the promotion of M-commerce.

Some announced projects that included advancement of M-commerce, Push-to-Talk services, the launch of Mobile Virtual Network Operators (MVNP) have yet to be materialised in the country that had a potential to attract decent sum of investment in the country.

Analysts say FDI inflow may be witnessed in the remaining months of the current fiscal year provided the service is launched.

Cellular phone companies have invested handsome capital in infrastructure, commercial offices and media campaigns in the past years but seemed to be cautious despite the fact the ratio of the revenue and profit witnessed growth amid stiff market competition.

The profit repatriation of telecom companies has increased 49.5 percent so far in the current fiscal year. They have sent back $54.8 million revenues to their parent companies situation in other countries as against $37.1 million revenue repatriated in the same period of last fiscal year, State Bank of Pakistan figures showed.

However, some of the companies in cellular phone and WLL sector have witnessed decline in their annual revenue owing to slow down of services and tough competition among the market players.