Islamabad High Court (IHC) ordered Zong to pay over two billion rupees back to its customers over charges that were “collected incorrectly”. This could undoubtedly seriously set back the Chinese-owned Pakistani mobile carrier.
According to the IHC, the mobile data network operator had managed to collect a significant amount by “charging 10 rupees from customers each time they purchased and used a prepaid card valuing 100 rupees as service charges”.
Pakistan Telecommunication Authority (PTA) has instructed Zong to credit the incorrectly collected amount directly to customer accounts. Moreover, the credited amount will not have an expiration date for use.
The immediate monetary impact on the company, however, might create some minor cash flow issues because if customers get credit back, they are likely to not load up their accounts with as much money as they usually do.
While two billion rupees is a colossal amount, it might not significantly hurt Zong. This is because Zong’s revenue figures stayed strong in FY 2023, resulting in a 126 billion rupee revenue as per PTA’s annual Report 2023. To put the financial loss into perspective, it is to be noted that the amount to be repaid is just 1.58 percent of annual revenue.
Another benefit for Zong is that they will not incur transaction costs on the amount they are supposed to credit to consumers as they already have accounts registered with the company. However, an interesting question that arises is how former users will obtain their credit back, which was unfairly collected from them.
Experts are predicting that the true cost to the mobile carrier will be implicit in nature. This is because Zong could now appear as exploitative, with fees designed to extract money from their customers unfairly.
This could significantly damage the brand image and could erode the trust of the over 46 million subscribers that Zong has for its mobile services. This does not present an immediate threat to Zong’s revenue stream; however, a loss in brand reputation might detrimentally affect future cash flows as customers switch away to ‘more trustworthy’ competitors.
The primary beneficiary in such a case is most likely to be Jazz, who has over 71 million mobile subscribers. Experts are claiming that it might be best for executives from Zong to credit customers back and prevent any potential reputation loss.
It will be interesting to follow the developments and see how operations change for Zong once credit has been issued to its customers. The number of mobile phone users for the company has been rising steadily since 2019, so revenue losses from issuing credit might not be significant due to a larger customer base spending more money with the company.