Pay $450mln renewal fee or licences expire on Aug 21, PTA orders Jazz and Telenor

Pakistan’s biggest mobile network Jazz, and the country’s second-largest telecoms firm, Telenor, are challenging in court the license renewal process after government’s last-minute price hike for a long-term mobile operating license renewal. (AFP)
Updated 01 August 2019

Pay $450mln renewal fee or licences expire on Aug 21, PTA orders Jazz and Telenor

  • Pakistan’s biggest and second-largest telecom firms have taken the government to court over the renewal process and price
  • Companies believe licence price hike goes against a 2004 agreement and have challenged the PTA for setting the price in USD

ISLAMABAD/KARACHI: The Pakistan Telecommunication Authority has informed the country's biggest mobile network, Jazz, and second-largest telecoms firm, Telenor, that their licences will stand expired on August 21 if the companies do not agree to pay a renewal fee of $450 million as per the PTA’s terms and conditions, PTA and Jazz officials said this week.
Pakistan’s telecoms market was deregulated in 2004 and foreign firms such as Jazz have invested heavily. But now the company fears the new renewal fee, which it says goes against an agreement struck in 2004, will pose a significant risk to the connectivity of millions of Pakistanis and jeopardize a growing digital economy.
According to PTA figures as of April 2019, Pakistan has 161 million cellular subscribers, with 59.2 million using Jazz and 44.8 million on Telenor.
“The decision by PTA to expire the licences of operators on August 21, 2019, if not renewed on their terms, is indeed concerning,” Ali Naseer, Chief Corporate and Enterprise Officer at Jazz, told Arab News in an interview this week. “This can potentially disrupt services for millions of Pakistani cell phone users.”
A Telenor spokesman did not respond to repeated calls for comment but a PTA directive to Telenor dated July 22 and seen by Arab News orders the company to pay the $450 million renewal fee by the August 21 deadline and on the PTA’s terms, or risk discontinuation of operations.
Mobile technology is the primary means of communication for millions of Pakistanis. Recent intelligence research by the GSM Association, a trade body that represents the interests of mobile network operators worldwide, estimated the total economic impact of mobiles on Pakistan’s economy was $17 billion, or 5.4% of GDP.
In 2017, total direct tax and fee payments by the mobile sector were estimated at $950 million, 29% of operator revenue, and the wider mobile ecosystem contributed a total of $1.9 billion in direct and indirect taxes in 2018, as per the GSM Association. A tax directory issued by the Federal Board of Revenue for tax year 2017 listed Telenor and Jazz among the country's top corporate taxpayers.
Pakistan’s government is currently struggling to lift revenues, cut ballooning public debt and raise foreign reserves. A recently signed loan agreement with the International Monetary Fund is aimed at shoring up fragile public finances and strengthening a slowing economy.
“It’s important that Pakistan doesn’t ... place gaining inflated revenues from spectrum licences above the connectivity of its citizens,” Brett Tarnutzer, Head of Spectrum at GSMA, said. “Spectrum prices and taxes should be set at a sufficiently low level that allows operators to deliver affordable services and deploy mobile broadband widely.”
“NEGLIGENCE AND INCOMPETENCE”
The licences of both Jazz and Telenor were originally set to expire on 25 May. In early May, the two companies took PTA to court after the Authority asked them to pay a $450 million renewal fee, more than double the dollar price at which the operators originally acquired licences at auction in 2004.
At the heart of the court challenge between the telecom firms and the Pakistan government is a 2015 telecommunications policy that replaced a 2004 version and which Jazz and Telenor say outlined the terms and conditions for auctions of new spectrums but did not lay down any guidelines regarding renewals.
Globally, licence renewal terms are to be communicated to operators 18 months before a licence is due to expire. According to PTA documents seen by Arab News, the Authority came up with new terms on May 9, a little over two weeks before the May 25 deadline and after Jazz and Telenor had taken the matter to court.
“That is the first example of negligence or incompetence because now, in 2019, when the renewals were due, we found ourselves in a situation where there is no framework,” Naseer said. “Had they [government] come out with a reasonable policy, we would have accepted that because we want predictability. Jazz is now 25 years in the market, we are one of the largest foreign direct investors in the country, we’re not going anywhere in a hurry. We are beholden to the country and we want to work and progress.”
Jazz also says that it communicated its intention to renew its licence 30 months prior to the May 25 expiry deadline, as specified in the licence terms. PTA was then required to inform the operators about the renewal terms and conditions within three months of receiving their intent for renewal, which the Authority did not. In the absence of a new set of guidelines formulated and communicated within the deadline as set by the law and the licence terms, Jazz and Telenor argued in court that the 2004 licence terms and conditions should continue to apply to the latest renewal.
After several hearings, the Islamabad High Court remanded the case back to PTA last month, asking the Authority to review the terms of renewal with a “fresh eye.” After quasi-judicial hearings for both Jazz and Telenor, PTA concluded on July 22 that the telecom operators would have to pay the set price of $450 million by August 21.
PTA directives to Jazz and Telenor seen by Arab News said payment terms for the $450 million renewal fee would be 100% upfront or 50% upfront with the remaining 50% paid in five equal annual installments on the London Interbank Offered Rate, plus 3%. The payment could be made in USD or its equivalent in Pakistani rupees, calculated at the market exchange rate at the time of payment.
“We are disappointed that PTA has not been able to see our point of view on these renewals,” Naseer said. “We are committed to endeavour towards improved connectivity and an enabling digital environment in Pakistan.”
A PTA spokesman declined repeated requests for an interview and only referred to public documents about the licences.
“EVALUATING ALL OPTIONS”
The decision by Pakistan’s cash-strapped government to set the new renewal fee in US dollars and not in local rupee currency, which has lost about 40 percent against the dollar in the last 20 months, is another major sticking point for the mobile operators.
The 2004 auction for a 15-year licence cost $291 million, equivalent to Rs17 billion at the 2004 exchange rate. But with the rupee plunging to record lows against the dollar, Jazz now faces paying Rs67 billion for $450 million, a 265% increase compared to what Jazz paid in 2004.
Naseer said the company earned and charged customers in local currency, not dollars, and thus setting the renewal fee in dollars was “unsound.”
“We believe in Pakistan and if word gets out that existing investors are being treated like this it makes it very difficult for us to say ‘Pakistan is open for business’,” Naseer said.
Jazz says it is now evaluating the option of renewing its licence at the PTA’s asking price, letting it expire or filing an appeal with the Islamabad High Court before August 22. Telenor’s options are similar.
“Honestly, at this stage we are evaluating all our options,” Naseer said. “Nothing has been ruled out.”


'No food left in the sea': Pakistani fishermen fearful as Chinese trawlers dock at Karachi port 

Updated 19 October 2020

'No food left in the sea': Pakistani fishermen fearful as Chinese trawlers dock at Karachi port 

  • Fisherfolk forum says government plan to allow Chinese to carry out deep-sea fishing in territorial waters could render millions jobless 
  • Federal government says bottom trawling will not be allowed under new fishing policy

KARACHI: A pressure group that represents Pakistani fishermen has said a government plan to allow Chinese companies to carry out deep-sea fishing in the country’s territorial waters could threaten the survival of at least three million people who depend on the sea for livelihood.
Last month, 12 Chinese deep-sea trawlers docked at the port of Karachi, unleashing fear among local fishermen who say commercial fishing vessels and bottom-trawling would deplete fish stocks in the exclusive federal sea zones off the Sindh and Balochistan provinces. 
Bottom trawling - dragging nets across the sea floor to scoop up fish - stirs up the sediment lying on the seabed, displaces or harms some marine species, causes pollutants to mix into plankton and move into the food chain and creates harmful algae blooms or oxygen-deficient dead zones.
The coastal line of Sindh and Balochistan is 1,050 km long, Mohammad Ali Shah, Chairman Pakistan Fisherfolk Forum, told Arab News last week, saying around three million fishermen relied on the sea to survive. 
A new fishing policy is expected but yet to be revealed by the government, he said. 
“The deep-sea trawler policy has not yet been approved but before that they [China] have brought these trawlers,” Shah said, calling the arrival of the Chinese vessels at Karachi port last month ‘illegal.’ 

In this undated photo, fishing vessels of Fujian Fishery Company move from the Gwadar port towards Karachi, Pakistan (Photo courtesy: Fishermen Cooperatives Society)

In 2018, the government enacted a deep-sea fishing licensing policy that both fishermen's representative bodies and provincial government bodies opposed, calling it a constitutional violation and an encroachment on the livelihoods of fishermen in the coastal provinces.
Fears about foreign fishing companies eating up local communities are not new.
For years, fishermen in the southwestern city of Gwadar in Balochistan province - a flagship of the $60 billion China-Pakistan Economic Corridor - have protested against foreign trawlers. 
Tensions first began to mount when the Fisheries Department disclosed its plan to issue licenses to various foreign fishing vessels to operate in an exclusive economic zone in 2016.
But last week, the federal minister for maritime affairs, Ali Haider Zaidi, told Arab News the country’s new deep-sea fishing policy would not allow Chinese trawlers to engage in unregulated deep-sea fishing. Bottom trawling, he said, would be banned under the new policy.
“Importing boats is not illegal,” he said. “How you use them has to be regulated.”
Pakistan divides its sea into three zones, where zone-3 (from 20 to 200 nautical miles) is controlled by the federal government. Up to 12 nautical miles (zone-1) is the domain of the provinces Sindh and Balochistan and between 12 to 20 nautical miles the sea is declared a buffer zone. 

Fishermen remove fish from a net at the Clifton beach in Pakistan's port city of Karachi on Oct. 6, 2020. (AFP/File)

Local fishermen are not allowed to fish in zone-3 and foreign fishing vessels are not permitted to fish in the other two zones under the existing policy.
The Fishermen's Cooperative Society (FCS), which issued the permit to the Chinese trawlers, said the Chinese fishing vessels would not use the destructive bottom trawling method and instead help ‘upgrade’ Pakistan’s fishing industry and export.
Official figures put the annual value of Pakistan’s fish exports at roughly $450 million.
“Bringing Chinese trawlers for deep sea fishing is in line with the government’s deep-sea fishing policy and aimed at upgrading and modernizing fishing, besides providing job opportunities to local fishermen,” Abdul Berr, Chairman of the Fishermen's Cooperative Society, told Arab News.
“Around 3,500 fishermen will get employment opportunities with the arrival of the world’s latest fishing boats and modern small boats,” Berr said. 
He added: “First, 70 percent of the staff at trawlers and processing facilities will be local. There will be no fishing in provincial territorial waters. The trawlers will bring all their catch to Karachi where it will be processed in factories and then exported.”
Small local fishermen would receive modern fiber boats on ‘easy instalments,’ Berr said, a step towards replacing their obsolete boats.
But Sindh’s minister for livestock and fisheries, Abdul Bari Pitafi, said the mega fishing ships would wipe out sea-life, even if they were only operating in the federal government’s zone-3.
“We will...also oppose its [trawlers’] operations in zone-3 because they will just wipe out sea-life including the fish’s seed,” Pitafi told Arab News.
In 2016, a survey carried out by the Food and Agriculture Organisation revealed that more than 72 percent of the fish stock in Pakistan’s coastal areas had already declined.
“One trawler does a catch that is equal to a catch by 100 of our fishing boats,” Younus Khaskheli, a fisherman, said. “And their fishing net is the most dangerous one, because it hunts thousands of tons of fish.” 
Tens of thousands of fishing boats are registered in Pakistan, he said, with fishermen from Sindh, Balochistan, Punjab, Khyber Pakhtunkhwa and even Bangladesh fishing in these waters.
“Our sea stock will end; the country will lose the income of billions and our fishermen will become jobless,” Khaskheli said. “There won’t be any food left in the sea.”