Digital promise, analogue problems

Business Recorder

18-07-2025

Pakistan stands at the edge of a digital breakthrough if we look at the mobile broadband covering nearly 98 percent of its population, a growing digital services sector, and the presence of proactive regulatory institutions like the Ministry of Information Technology and Telecommunication (MoITT) and the Pakistan Telecommunication Authority (PTA). On the face of it, the foundations of a thriving digital economy are already in place. Yet, the promise remains largely unfulfilled.
The Asian Development Bank's new report—Pakistan's Digital Ecosystem: A Diagnostic Report—is a timely reality check. It spells out a hard truth: structural weaknesses, fragmented governance, poor digital literacy, and limited private investment are weighing down Pakistan's digital ascent. Without urgent, coordinated, and strategic reforms, the country risks losing its digital dividend and leaving behind the very populations it seeks to uplift.
Looking at the telecom sector, a vital backbone of any digital economy, it mirrors this paradox. On paper, Pakistan boasts one of the most liberalized telecom markets in the region. The PTA and MoITT have actively pursued policies that encourage competition and private participation. The Universal Service Fund (USF), for instance, has made headway in expanding infrastructure to underserved regions.
However, the on-ground reality is less rosy.Although broadband coverage is near-universal, actual usage lags due to affordability barriers and poor digital literacy. Service reliability is patchy, particularly in rural areas, where quality-of-service issues persist.
Secondly, the telecommunication is a competitive market and is under pressure. While multiple operators operate in the country, declining investment levels, macroeconomic instability, currency depreciation, and difficulty in repatriating profits have left telecom players cautious and constrained. Sector-specific taxes and regulatory fees further erode margins, reducing incentives for expansion and innovation.
Then the fragmented governance in a challenge. Policy implementation suffers from overlapping jurisdictions between the MoITT, PTA, and provincial IT boards. The private sector often remains on the sidelines during policymaking, eroding trust and weakening reform outcomes.
Not to forget the unfinished 5G roadmap. The sector has been preparing for 5G rollout. Yet timelines remain vague, and the broader regulatory and investment environment remains uncertain—delaying momentum at a time when digital economies across the region are accelerating.
ADB calls for some bold moves: streamlining the roles of key institutions, lowering sector-specific taxes, improving spectrum management, and fostering an investor-friendly environment. These aren't new ideas—but the urgency today is.
Nothing captures the friction between promise and paralysis better than the stalled merger between PTCL and Telenor Pakistan.
On the surface, the merger is part of Telenor's global strategy: exit from financially unviable markets through consolidation. It has done so in Myanmar and India, driven by regulatory uncertainty and poor market conditions. But Pakistan adds its own twist to the story—one that underscores why digital progress here remains stuck in second gear.
The unresolved dues from PTCL's privatization to Etisalat continue to haunt the merger process. The issue has remained a political and legal minefield. Then the absence of cohesive digital governance and the lack of clarity on licensing, spectrum pricing, and competition regulation have made it harder for such a deal to pass cleanly through institutional channels. Judicial entanglements beyond CCP are also stalling the process further. Moreover, precarious financials, fears of market concentration and unclear documentation have also kept the deal in limbo.
In a recent interview with BR Research, Jon Omund Revhaug, Executive Vice President and Head of Telenor Asia, pointed out, 'Telecom is a capital-intensive industry, and the current industry structure does not support meaningful investment in the sector. A swift resolution of the ongoing sale process would create a stronger second-position player in the market, one who is better positioned to invest in critical digital infrastructure, resilient data networks, and future technologies that can drive innovation at an accelerated pace.'
The numbers reinforce this urgency. Telecom investments in Pakistan have plunged by over 60 percent in under four years, as reported in the Pakistan Economic Survey FY 2025—underscoring the urgent need for sectoral restructuring to revive investor confidence and sustain future growth.
The message of the ADB's diagnostic is clear: Pakistan's digital story doesn't need new chapters—it needs editing, clarity, and better structure. The tools, coverage, and institutional frameworks are there. But unless governance becomes more coherent, regulations more investor-friendly, and digital literacy more widespread, the country's digital ecosystem will continue to look like an impressive building—missing a roof.
If there's one lesson from the PTCL-Telenor case, it's that no amount of infrastructure or global strategy can override weak systems, legacy burdens, and fragmented leadership. For Pakistan to truly unlock its digital dividend, it must stop laying more bricks and start fixing the foundation.