CCP Ends ICH, Fines LDI Operators with Billions of Rupees

The Competition Commission of Pakistan (CCP) has nullified International Clearing House or ICH and has imposed a penalty of 7.5 percent of annual turnover on each of 14 LDI operator that were part of the agreement for violating section 4 of the Competition Act 2010, we have confirmed with sources.

On other hands, in an interesting turn of events, appointment of CCP Chairperson and Members was challenged at Islamabad High Court by Mr Junaid Jahangir.

The petitioner pleaded the court that the members’ appointments at CCP including the chairperson was done without due competitive process which is a violation of rules . Justice Riaz Khan has admitted the petition and has issued notices to all concerned to submit reply.

According to data provided by Pakistan Telecommunication Authority, commission maintained that volume of incoming calls as on September 2012 before the ICH Agreement was 1.9 Billion minutes, which decreased to 579 million minutes in February-13 after the establishment of ICH.

Earlier, in its order, CCP observed that the estimated revenue of LDI Operators for the month of September 2012 — before the ICH arrangement — were US $8.37 million, which increased to US $59 million in the month of October 2012 – after establishment of ICH — and currently stands as US $34 Million in the month of February 2013.

Despite reduction in the incoming traffic by 70 percent — after the establishment of ICH — the revenue of LDI’s increased by 308 percent in Post ICH period. The main reason behind increase in Revenue of LDI’s is that ASR now has been taken as to 8.8 cents/minutes from rates around 2 cents/minute pre ICH.

The order states that the monthly APC received/ receivable by the PTA, has decreased from $24.33 million to $16.78 million in the month of February 2013 (Decrease of 31 percent).

The Bench held that the facts and figures available highlight the pernicious nature of the ICH arrangement, its harmful effects on the telecom sector, consumers and the economy in general which must be condemned and cannot be condoned at any cost.

The order states that the ICH Arrangement reduces choice, forecloses the market, removes incentive for better quality of service, removes incentives for investments in improvement of infrastructure, reduces the size of the market and market players, confers anti-competitive advantages and becomes a clear threat to consumer welfare in total negation of spirit of Telecom De-regulation Policy, 2003 apart from the provisions of the Competition Act. In fact, ICH Agreement squanders any gains that we have made in the telecom sector till now – gains that have accrued precisely because of a focus on competition.

LDI Operators have been directed to cease and desist from carrying such prohibited practices and not to enter into any other agreement of similar nature having object or effect of restricting competition and PTA has been advised to ensure restoration of competition amongst the LDI Operators as it existed prior to implementation of the ICH Agreement.

For failure to comply with the earlier order passed by the Commission requiring the LDI operators to seek clearance if at any point of time they intend to enter into ICH arrangement, a penalty of Rs 1,000,000 (one million) has been imposed on all the LDI Operators.

Commission also imposed a fine of 7.5 percent of annual turnover of all 14 participating LDI operators.

The penalty is said to amount tens of billions of rupees, as only the penalty of Rs 8.309 billion, Rs 534 million and Rs 189 million has been imposed on PTCL, WorldCall and Telecard respectively, as per CCP order.

Other operators that were imposed with fine include:

• Telenor LDI Communications (Pvt.) Ltd
• Redtone Telecommunications Pakistan (Pvt.) Ltd
• WorldCall Telecom Limited
• Link Direct International (Pvt.) Ltd
• TeleCard Limited
• ADG LDI (Pvt.) Limited
• Pakistan Telecom Company Limited (PTCL)
• Wise Communication Systems (Pvt.) LtdDancom Pakistan (Pvt.) Ltd
• Wi-Tribe Pakistan Limited
• Wateen Telecom (Pvt) Ltd
• Circle Net Communications Pakistan (Pvt.) Ltd.
• Multinet Pakistan (Pvt) Ltd
• 4B Gentel International (Pvt) Limited

The order also provide that for any loss resulting from illegal gains received by LDI Operations under the ICH Agreement, the aggrieved parties can claim compensation from the LDI Operators before the court of competent jurisdiction in pursuance of this Order.

During the proceedings the LDI operators pleaded before CCP that they entered into the ICH Agreement on the directives of the Ministry of Information Technology (MOIT) and PTA. However, in view of the settled principle of law that a policy directive cannot override or prevail expressed provisions of the statute passed by the legislature, the Bench held that no protection or immunity can be sought from the application of the Competition Act by the undertakings under the umbrella of such a policy directive, the CCP order added.

CCP, however, didn’t issue any order against executives of MoIT and PTA for issuing the ICH directive and getting it implemented because of legal restrictions.