Press Releases

12
May 2006

Mobile Industry for Elimination of Activation Tax says Telenor

"Islamabad May 12, 2006: A statement issued by Telenor Pakistan has highlighted industry support for “the abolishment of activation tax - a burning issue in the cellular sector of the country, and a position publicly supported by the Ministry of IT & Telecom: The elimination of activation will increase reinvestment rate and affordability, which will in turn lead to increased teledensity and more equitable access, the statement said. The country dynamic leadership envisages a progressive information infrastructure to enable effective communication, connecting Pakistan from within and without. The Industry believes this will be done most effectively by taking mobile services to every corner of the country. Abolishment of activation tax thus becomes necessary to maximize industry growth, the statement said.

The statement cited from a recent study endorsed by all mobile operators in the industry and submitted to relevant ministries. The Telecom industry has contributed an estimated PKR 30 billion to the national exchequer in the last fiscal year and attracted US$ 500 million FDI in Pakistan, which was invested primarily in infrastructure for network rollout. Where, subscriber growth has also witnessed enormous escalation in recent years. This exceptional growth has partly resulted from GoP decision to gradually reduce the Activation Tax, which was reduced to Rs. 1,000/- in June 2004 and subsequently to Rs. 500/- in June 2005. Analysis shows that each reduction made by GoP in activation tax has resulted in nothing short of a revolution in the cellular industry.Activation tax increases the effective price of mobile subscription and thus hinders penetration. In doing so, this tax can have a harmful impact on economic growth in long-run. We strongly believe that lowering barriers such as the eradication of activation tax are measures that will provide a sustainable pathway to high teledensity and to provision of access in underprivileged communities. Unfortunately, Pakistan is one of the few countries of the world, which imposes fixed taxes on mobile telephony in the form of activation tax. The impact of such taxation has proven to be negative in other economies. The statement further added, When the Bangladeshi government established an activation tax of US$ 13.8 on all new subscriptions, the market growth rate was cut to less than 40%. This meant an estimated decrease in new subscribers by 1.5 million in one year.

Clarifying the impact of increased teledensity on economic growth, the statement said that according to a “London Business School study, an increase of 10% in teledensity increases a country gross domestic product (GDP) by 0.6 percentage points, which is a significant increase considering that the average GDP growth rate of most countries is 2%.

The statement concluded by lauding the Ministry of IT & Telecom commitment to equitable mobile access in the country and for its leadership on the issue of activation tax.

The Telenor group is an international provider of high quality telecommunications, data and media communication services. Telenor ranks as one of the biggest GSM service providers in the world with over 90 million subscribers. Telenor Pakistan is 100% owned by Telenor and adds on to its operations in Asia together with Thailand, Malaysia and Bangladesh."

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