The Auditor General of Pakistan (AGP) has termed the grant of Non-Objectionable Certificate (NoC) for the merger of Mobilink and Warid as unjustified.
The audit report, on the accounts of Telecommunication Sector for Audit Year 2017-18 – a copy of the report is available with ProPakistani – recommended that the matter should be investigated for fact-finding and responsibility should be fixed on those responsible for granting the NOC in violation of the provisions of the law.
According to Rule 11 of Telecommunications Rules 2000, the granted cellular licenses shall be personal to the licensee and shall not be assigned, sub-licensed to or held on trust for any person, without the prior written consent of the Authority, noted the AGP audit.
It said that Rule 11 (4) stipulates that a permission given by the Authority under sub-rule (3) shall include the requirement that the licensee shall take all necessary actions to ensure the continuous and uninterrupted use of that part of the licensee’s licensed telecommunication system being sold, pledged, mortgaged or charged.
Section 5 (2) (a) of the Pakistan Telecommunication (Re-organization) Act, 1996 further states that the Authority shall grant and renew licenses for any telecommunication system and any telecommunication service on payment of such fees as it may, from time to time, specify.
It was observed that Pakistan Telecommunication Authority (PTA) received notices on 15th December, 2015 from M/s Pakistan Mobile Communications Limited (PMCL) and Warid Telecom for the change in substantial ownership interest and merger of both companies. Resultantly, PTA issued a NOC on 23rd May, 2016.
When contacted, a Jazz Spokesperson shared with us:
Jazz has been the market leader in the Pakistan Telecommunications’ market for a very long time. We always endeavour to provide the best customer experience to our millions of customers.
Over the years, Jazz has invested billions of rupees in Pakistan by upgrading our networks with state of the art technologies and providing innovative services to our valued customers. The merger with Warid, in 2016, was a big step in that journey.
We are not aware of the Auditor General of Pakistan’s advice that is being referred to, but can assure you that the appropriate authorities have accorded the requisite approvals and the merger was duly sanctioned by the Islamabad High Court.
Irregularities Observed by AGP
PTA management allowed M/s Warid for the provision of 4G/LTE services without having a license and participation in NGMS auction. At the time of the merger, under the heading “Financial Analysis”, PTA mentioned that the merger of PMCL and Warid would result in the availability of 4G/LTE service to approximately 37 million subscribers of Mobilink who previously did not have access to 4G/LTE. AGP audit said that this was an undue favor to PMCL.
PTA allowed the merger of both companies but the licenses were not merged. The AGP said that through this, PMCL was enjoying two licenses and spectrums without paying any additional cost/fee and no commitment from the merged companies was obtained for the renewal of Warid’s license after its expiry in 2019 which has deprived the government of its renewal fee.
The record further revealed that M/s CMPAK (Zong) launched a complaint vide letter dated 16th March, 2017 by highlighting various aspects of the merger like the quality of service; re-farming of a spectrum and post-merger effects. It was stated that M/s PMCL was violating S.10 (1) of Competition Act and clause 3.9 of competition guidelines and indulging in deceptive marketing practices.
Instead of addressing the complaint, PTA responded that PMCL could advertise for any service permissible under its license and PTA was vigilant about its responsibilities.
The AGP was of the view that granting NOC for the merger of Mobilink and Warid was an undue favor to the referred telecom operators and was tantamount to a scanty role of the Authority as a regulator of the telecom industry in Pakistan.
The audit report said that the matter was reported to PAO and management from July to September 2017. However, the reply was not acceptable as the permission was granted to PMCL for allowing LTE services without paying any fee and the merger was against the provisions of the Act.
The DAC, in its meeting held in December 2017, pended the para and directed PTA to explain its position on this technical issue.