Price hike for license renewal worries foreign investors, CEO Jazz

The chief executive of Jazz Aamir Ibrahim has said that the increase in the prices for a long-term mobile operating license renewal will worry foreign investors who are seeking stability in their business operations. The CEO made his remarks amid an ongoing case in the court regarding the renewal of telecom licenses.

The two leading telecom operators including Jazz and Telenor are challenging the license renewal process in the court, due to the double price rates set by the government at $450 million from an expected $291 million.

The conflict in the renewal rates arises as the Pakistani government is facing an immense pressure to boost tax revenues as Pakistan had signed a preliminary loan agreement with the International Monetary Fund (IMF) that requires it to cut billions of dollars from its inflated budget deficit. Telecom sector in Pakistan has grown rapidly over the past decade but due to high competition in the market mobile operators fear a tougher period ahead, as the economy is degrading with a rise in inflation.

Jazz says that the hike in the prices goes against the agreement signed previously in 2004, and the telecom operators are frustrated that the government had two years to decide the price of the license renewal but raised the price only three weeks prior to the May 25 deadline.

Ibrahim told Reuters at Jazz’s swish headquarters in Islamabad, “Ultimately the investor needs profitability, stability, and continuity in a country that’s different from their own. So for a foreign investor having these surprises three weeks prior to the renewal of a license is a big shock”.

The government has also asked the telecom operators to pay the fee amount in US dollars, whose value has increased significantly in the past few months. The 2004 auction for a 15-year license cost $291 million, which is equivalent to 17 billion rupees at the 2004 exchange rate. But as the rupee value is degrading against the dollar, Jazz now has to pay 67 billion rupees for $450 million.