The Pakistan Telecommunication Authority (PTA) has observed that the Mobile Termination Rates (MTR) are higher in Pakistan than the international benchmarking, and may revise it downward to Rs. 0.30 per minute from 1 October 2021 against the current Rs 0.70 per minute.
The reduction in the MTR will help to reduce the variable cost of each operator and will allow the benefit to be passed on to the consumers as reduced tariffs, will help operators to offer better off-net call rates, will reduce the current differentials of on-net and off-net rates, and will protect the interests of smaller operators.
The MTR is the ‘price that a Cellular Mobile Operator (CMO) charges to another mobile operator for terminating its off-net calls on its network’. Generally, end users are not aware of the wholesale termination charges that have been settled among the operators.
Higher termination charges are expected to favor larger players as compared to smaller operators, hence the role of the regulator is important in providing a level playing field by rationalizing the termination rates in the telecom sector. Furthermore, the effective implementation of interconnection promotes competition in the telecom sector, the PTA added.
The PTA has undertaken international benchmarking analysis which shows that the MTR calculated for Pakistan is between Rs. 0.28 and Rs. 0.30 as per the purchasing power parity (PPP) adjustment, and is between Rs. 0.12 and Rs. 0.24 as per the Average Revenue per User (ARPU) adjustments.
Accordingly, the current MTR of Rs. 0.70/min in Pakistan is still a lot higher than the calculated MTR using benchmarking. Therefore, it has reportedly been proposed that the MTR in Pakistan may be determined at Rs. 0.30 per minute with effect from 1 October 2021.
The last change in the MTR had been decided in 2018 based on international benchmarking. Adopting a glide path approach, a further review of the MTR is required as the current MTR at Rs. 0.70/min in Pakistan is still higher than the international benchmarking results had been in 2018 — the MTR at Rs. 0.30 to Rs. 0.43 per minute as per the PPP adjustment, and Rs. 0.18 to Rs. 0.19 per minute as per the ARPU adjustment.
The MTRs in Pakistan are also higher than the MTRs in regional countries, and the PTA has been requested by telecom operators to review them.
Clause 5.1.12 of the Telecommunication Policy states that the cost-based interconnection charges will be reviewed not less than once every two years. In the case of Pakistan, the data on cost-based interconnection charges is not readily available. Accordingly, this consultation paper provides benchmarking analysis for the determination of the MTR in Pakistan in line with Clause 18.6 of the interconnection guidelines that allow the PTA to establish interconnection charges based on benchmarking when adequate cost information is not readily available.
The PTA took a sample of 26 countries and calculated the average benchmark MTRs using the mean and median of the PPP-adjusted MTRs, and compared it with Pakistan’s PPP-adjusted MTR. Resultantly, the proposed MTRs for Pakistan were calculated as Rs. 0.30 and Rs. 0.28 by the mean and median benchmark respectively.
The ARPUs in cellular mobile markets of the sample countries are between $1.37 and $30.96. For alternate benchmarking, the PTA has considered the ARPUs of the sample countries relative to Pakistan’s ARPU. Using this benchmarking method, the proposed MTR for Pakistan is between Rs. 0.24 (mean) and Rs. 0.12 (median).
Therefore, the current MTR in Pakistan at Rs. 0.70 per minute is still quite high as compared to the above-proposed MTR based on international benchmarking.
The average benchmark MTRs were calculated using the mean and median of the PPP-adjusted MTRs, and were compared with the PPP-adjusted MTRs of Pakistan. Resultantly, the MTRs for Pakistan are calculated as Rs. 0.32 and Rs. 0.28 by the mean and median benchmark respectively. The ARPUs in the cellular mobile markets of the sample countries are between $1.37 and $24.12.
The ARPUs of the sample countries relative to Pakistan’s ARPU were used for alternate benchmarking. Using the benchmarking adjusted for the ARPUs, the proposed MTR for Pakistan is Rs. 0.16 (mean) and Rs. 0.15 (median).
The proposed MTR for Pakistan based on the PPP adjustment is between Rs. 0.28 and Rs. 0.32 as compared to Rs. 0.30 and Rs. 0.43.
Considering the MTR of the regional countries in USD, Pakistan’s MTR at US cents for 0.45 per minute is much higher than those of Bangladesh, India, Malaysia, and Sri Lanka that are US cents 0.16, 0, 0.24, and 0.28, respectively.