Pakistan’s telecom sector is facing significant challenges to its 5G rollout and overall growth due to a decline in Foreign Direct Investment (FDI) and overall sector investments. According to the Pakistan Telecommunication Authority (PTA) annual report, FDI in the telecom sector dropped to $46 million in 2023-24, down from $58 million in 2022-23. This marks a continued decline from $204 million in 2020-21.
At the same time, telecom sector investments fell to $765 million in 2023-24, a slight drop from $770 million the previous year, and down sharply from $1.657 billion in 2021-22. The PTA attributes the decline to Pakistan’s challenging economic conditions, which have diminished investor confidence and hindered capital inflow.
The report also notes that substantial investments are needed for the country’s 5G rollout. However, challenges such as slow returns on investment, high infrastructure costs, and the availability of 5G handsets remain significant obstacles. The path to 5G includes upgrading existing networks, deploying small cells, and enhancing fiber optic backhaul, all of which require considerable financial investment. Additionally, telecom operators are hesitant to commit to large upfront expenditures due to the competitive and price-sensitive nature of the market.
Muhammad Naveed, PTA’s Member Finance, linked the country’s economic instability to the decline in both FDI and telecom investments. He stressed the need for government incentives and public-private partnerships (PPPs) to reduce the financial burden on telecom companies and encourage the investments necessary to develop the 5G ecosystem.
Despite these challenges, the telecom sector in Pakistan achieved revenues of Rs955 billion in 2023-24, contributing Rs335 billion to the national exchequer, though slightly down from Rs341 billion in 2022-23. Additionally, the Mobile Average Revenue per User (ARPU) saw an improvement, rising to Rs276 per month from Rs229.
The lack of substantial FDI is particularly concerning, especially as countries like India, China, and Bangladesh are making rapid progress in their 5G infrastructure. India, in particular, has attracted billions in FDI for its 5G rollout, strengthening its telecom sector and fostering digital growth. In contrast, Pakistan risks falling further behind in the global digital race without strategic policy changes and greater investor confidence.
The PTA also emphasized that bridging the urban-rural digital divide is critical for ensuring equitable access to 5G. High deployment costs and logistical challenges in remote areas could leave rural regions underserved. Data from GSMA highlights that rural populations are most affected by this digital gap, with low smartphone penetration further exacerbating the issue.
