Saving telecom companies

Jordan’s ICT sector, at one time the centre of attention and flagship of all sectors, is being beset by one tax after another at a time operators need to strategise to deal with the fast-changing telecommunications landscape and put up the required investment to remain somewhat competitive.

The current drive to collect taxes from this sector will lead to impoverishment. Already signs of retreat are apparent, and a reversal is needed before another success story is sunk.

As an expected, and painful, consequence of the government’s policy of raising energy/electricity prices by 150 per cent, the special tax on mobile telephony from 12 per cent to 24 per cent, and the frequency rental rates last year, telecom sector revenues fell by 6.4 per cent last year, from JD1.69 billion in 2012 to JD1.58 billion in 2013.

Already the telecom sector laid off 384 people last year.

The fall in revenues and profits came after an inflationary year (4.5 per cent inflation), which alone should have raised revenues by the same amount, or at least a significant fraction thereof.

The year ended with revenues falling instead of rising.

Furthermore, revenues should have increased for another reason: the increase in the Jordanian population (2.2 per cent) and the immigrant population (10 per cent).

Instead, there was a 6.4 per cent drop in revenues.

If one were to add the population growth rates and inflation, and then the drop in revenues, one would be talking about a drop of over 20 per cent in revenues.

In other words, had government not acted in such a manner, the sector revenues and profits would have been much higher.

One should not exclude, of course, the impact of using new technologies such as Skype, Whatsapp and Viber, as substitutes for cellular (local and international) calls, which must have contributed significantly to lowering international call revenues.

However, raising sales taxes must have prompted an even greater consumer shift towards cost-saving technologies.

Good governance requires that production costs and taxes not be increased at a time when the industry is being restructured.

The sector that used to be in the not so distant past the pride and joy of all Jordanians should be looked at with compassion and support, not envy and taxation.

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