Cellular companies hurt by rupee-dollar exchange rate

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As the Pakistani rupee fell to a fresh record low against the US dollar in the recent days, cellular companies are among the most affected in terms of losses they face through their international roaming (IR) charges that are based on exchange rates.
On August 20, the rupee closed at 86.95/99 to the dollar, which was its weakest ever closing. While gauging the negative economic outlook of the country, currency dealers expect the rupee to remain under pressure, ‘as dollar payments are typically higher in July and August because of stronger oil demand and debt payments’.
Owing to this increasing $/PKR disparity, cellular companies are to witness losses, or slow down, of their IR business in this lucrative season of summer vacations and Umrah, because they pay their dues in dollars to their parent companies, official sources of the cellular industry told Pakistan Today. According to a notice of one cellular company regarding IR, ‘all tariffs are charged in Pakistani rupees and the $/Pak rupee exchange rate applicable for any calendar month is based on the open market exchange rate on the 23rd day of the preceding month.’
This is the season of Umrah, and after that is coming Hajj, so these two particular events bode well regarding the international roaming business for the cellular industry, said Moazzam Ali Khan, Head of Public Relations Ufone, while talking to Pakistan Today. He further said besides these two seasons, summer vacations are considered good for the IR business by the industry. The factors that contribute to the $/PKR disparity include oil import bill, which was $1260m in August 2010 against $970m in June this year, showing net increase of $290m; stalled payments from a bailout program by the International Monetary Fund (IMF); increased dollar demand; security situation, etc. Market analysts believe that these issues will remain for long because Pakistan could not reduce oil import bill till the complete resolution of the ongoing energy crisis, which is not going to happen in the near future, while the security situation is deteriorating day by day.
Therefore, the cellular sector of the country is also among the affectees because of this currency disparity as they will have to witness plausible slowdown in their IR segment. To a question as to why they don’t charge in dollars, sources said this was not possible as no subscriber will be willing to pay their roaming charges in dollars, but still this option is not out of consideration due to increasing devaluation of local currency. Sources further said that this disparity only benefits when subscribers come to Pakistan and use their services, but that is very limited kind of venues considering the security situation of the country. It is pertinent to mention that in August 2010 the rupee closed at 85.68 against the dollar and by August 20 this year it has been devalued up to 1.27, closing at 86.95. This is its weakest closing against the dollar.