According to the Pakistan Auditor General, the telecom sector loses over $1 billion in revenue each year due to grey traffic (AGP).
The telecom business in Pakistan confronts several obstacles, according to the report on the accounts of the Telecommunication Sector audit year 2020-2021, and requires vital multiple actions to harness the market’s potential.
Grey traffic is a problem in Pakistan’s telecom business, which is defined as the illegal routing of calls into and out of the nation to avoid paying taxes and regulatory penalties.
The Pakistan Telecommunication Authority (PTA) estimates that the sector loses $1 billion in revenue per year. Another issue is the renewal of the three telecom carriers’ licences, Telenor, Zong, and Warid, which were slated to expire in May 2019 after a 15-year period.
The PTA set the renewal price at $449.2 million per licence, prompting the telecom companies to go to court to demand the same treatment as Ufone, which had its licence renewed for $291 million.
Meanwhile, the other three telecommunications companies have paid half of the renewal payments. The national exchequer is losing revenue and foreign exchange as a result of the dispute.
Due to the ongoing conflict between the PTA and the Frequency Allocation Board (FAB) over the awarding of 4G spectrum to mobile firms based on the technical neutrality of their licences, spectrum management remains a difficult topic.
The issue was brought to the attention of audit since it could result in a loss of millions of dollars. Further contractual management challenges in the PTA have resulted in disagreements and litigation with service suppliers, which has prevented the PTA from generating income.
It is necessary to examine the function of the Special Communication Organization (SCO), which operates commercial services in Azad Jammu and Kashmir (AJ&K) and Gilgit-Baltistan (GB) without purchasing spectrum.
The non-vacation of the additional frequency spectrum from M/s CM Pak resulted in a loss of $17.306 million, according to the study (Zong).
According to the FAB forty-second board meeting, M/s CM Pak (Zong) had been awarded a temporary additional spectrum of 2 x 6.6 MHz (1755.7-1762.3/1850.7-1857.3 MHz) until the licence expires (22 October 2019), yet M/s CM Pak (Zong) was still using the additional frequency spectrum.
The Islamabad High Court has also issued a stay order against M/s CM Pak (IHC). The court ordered the status quo to be maintained on October 21, 2019.
According to the policy directive issued by the Ministry of Information and Telecommunication (MoIT&T) vide its letter dated 9 May 2019, the price of the 1800 MHZ spectrum was $29.5 million per MHz for a 15 years license. The national exchequer had sustained a loss of $17.306 million equivalent to Rs. 2.697 billion.
In November 2020, the situation was reported to management and the PAO. The IHC had decided on October 20, 2020, after many hearings, that the PTA and the FAB would be free to implement the policy directive.
Following that, on 14 December 2020, an Enforcement Order was issued to CM Pak, instructing him to vacate more spectrum immediately and to compensate for the improper use of the frequency spectrum. The case would be closed based on the Enforcement Order and the IHC’s ruling.In November 2020, the situation was reported to management and the PAO. The IHC had decided on October 20, 2020, after many hearings, that the PTA and the FAB would be free to implement the policy directive.
Following that, on December 14, 2020, an Enforcement Order was issued to CM Pak, ordering him to immediately vacate additional spectrum and compensate for the wrongful use of the frequency spectrum. Based on the Enforcement Order and the IHC’s decision, the case would be closed.
The DAC directed that the case be pursued in a court of law and that the progress be reported to audit at its meeting on January 7, 2021. Under intimation to audit, audit recommends that the case be vigorously prosecuted in a court of law.
The non-recovery of $72.562 million in late payment additional fees from operators for the renewal of licencing fees was also addressed in the report.
During a review of the records for licence renewals in 2019-20, it was discovered that the PTA management had not collected an amount of $72.562 million on account of the late payment additional fee on licence renewals in 2019-20.
The PTA management has also issued show-cause notifications to all three businesses (Jazz, Telenor, and CM Pak Zong) for non-payment of the LPAF.
In November 2020, the situation was reported to management and the PAO. According to the circumstances of the cases, the PTA had issued an order dated 22 July 2019 directing the licensees — PMCL and Telenor — to pay the renewal of their licences in accordance with the IHC’s ruling.
All of the licensees had appealed to the IHC, and the cases were still pending. It was made clear that any activities relating to the collection of debts would be subject to a court order. As a result, the money could not be recovered till that time. The audit advised that the legal cases be pursued and that the audit be informed of their status.
The report also mentioned the non-recovery of Rs. 391.884 million in Annual Regulatory Dues.
It also highlighted a loss to the national exchequer of Rs. 43.640 million as a result of the NBP’s late deposit of the amount in the FCF.
