Telcos Are Secretly Parking Dollars Outside Pakistan: Senate Committee

The cellular Mobile companies operating in Pakistan are parking dollars outside the country under the guise of royalty, technical fee and equipment imports and Federal Board of Revenue (FBR) should investigate mobile company’s data to check the outflow of dollars abroad.

These directives were given to the Federal Board of Revenue (FBR) by the Senate Standing committee on Cabinet Secretariat which met with Talha Mehmood in the chair on Thursday.

Mehmood said, “If mobile companies are in losses or earning only minor profits, how are they working for so long?”

He directed Member Inland Revenue FBR to check and investigate how dollars are being sent abroad.

FRB officials said that Rs 75 billion is outstanding against cellular companies as they have taken stay orders from high courts. The outstanding amount was Rs 150 billion; however, FBR recovered Rs 50 billion after vacating stay orders.

He further said that 3 out of 4 cellular companies have shown a profit of Rs 25 billion and deposited Rs 7 billion in taxes so far.

Jazz’s profit after taxation in 2018 was Rs 26.556 billion, Telenor made Rs 19.548 billion, Ufone had Rs 2.120 billion and while CMPak (Zong) reported Rs 897.486 million.

Member Inland Revenue Seema Shakil said that as per their declarations for the last five years, Pakistani telcos declared losses and paid minimum taxes. On average, mobile companies import equipment worth Rs 20 million annually, FBR official added.

The committee chairman said that major irregularities are taking in place in imports of equipment where an item worth one million is being imported but shown with a cost of 10 million in opening LCs and in this way dollars are being parked outside the country. He further said that if Warid was going in losses, how did Mobilink acquire it with losses. If they are going in losses, then how are they lobbying for bid and license renewals, Mehmood added.

Committee chairman directed FBR officials to check the matter and stop Pakistan’s dollars from going abroad.

Pakistan Telecommunication Authority (PTA) submitted, in writing, that out of the total five companies five years ago, one was in an unfeasible state which merged with another to the maintain subscriber base. At present, only two companies have large subscriber bases and are in net profits after all expenditures and taxes.

The other two companies are either still in losses or have shown very meager profits, despite a turnover of billions of rupees. There is a need that subscriber base should be increased in such a way that economy of scale is reached while expenditure and investment may be kept at the present level, or only increased to a tune which is in line with an increase in subscriber base so that sustainability is maintained.

Internet Traffic Monitoring

The committee also discussed the matter regarding PTA’s contract to a company working as a partner with Israeli intelligence for monitoring internet traffic.

Senator Mushtaq said that the agreement might have been with the US firm but Israeli secret agency’s involvement in all this could not be ruled out. He read out from the report that the NSO Group Technologies is an Israeli technology firm focused on cyber intelligence and was part of a controversy, as its technology was alleged to have been used to spy on Turkish citizens. Committee chairman said that the same firm was involved in hacking the data of 1.5 billion customers as per a BBC report.

He said that Francisco Partners is the mother company while NSO and Sandvine Inc are sub-companies. The committee directed Chairman PTA to investigate the matter as it is a sensitive issue and report to the committee.

Chairman PTA Major Gen (Retd) Amir Azeem Bajwa informed the committee that PTA has neither signed any contract for monitoring internet traffic with any vendor nor is it spending public money on the project.

He said the telecom industry has signed an agreement with Inbox Business Technologies to deploy ‘Web Monitoring System (WMS)’–a suitable technical solution capable of monitoring, analyzing and curbing grey traffic.

All LDIs (Long Distance and International), CMOs (Cellular Mobile Operators) and Submarine Cable Landing Station licensees are sharing the cost of the system under their regulatory obligations.

For addressing security concerns, PTA has obtained an undertaking from the vendor (Inbox Business Technologies) and manufacturer company Sandvine Inc., USA for any possible involvement of hostile element. The vendor is also obligated to get the system certified as per ISO 27001 international standards.

Moreover, a security agency has been involved to conduct a security audit of the system to find out any loopholes and vulnerabilities in the system. To further ensure security, a strict clause about system and material breach is included in the contract. In case, any such breach is identified and validated, the contract will be terminated, he added.

Faulty Safe City Cameras

DIG Headquarter Islamabad Police while briefing the committee on safe city project said that around 200 cameras are not working. He further said that the project has been helpful in reducing the crime ratio.

Committee chairman observed that Huawei has not fulfilled its obligations despite advance payment in the project and needs to be blacklisted and their technical evaluation of the project needs to be conducted before handing over the project to Islamabad police.

The committee expressed serious concerns over no-service or poor mobile services in areas like Hazara division from where CPEC route passes. Chairman PTA said that in the license renewal, rollout and quality of service obligations have been upgraded and the areas would be covered with data and voice coverage soon.

  • This is called transfer pricing and all multinationals do it not just telecom companies. They send their profits out in the guise of royalty payments or other fees to the parent company.

  • Also the senate should be informed that most tech companies run at a loss and despite running at a loss they have no shortage of investors willing to give them money.

  • unfortunately that’s true.. Telcos , made fake inovices for state Bank approvals on alignment with thier technical and royalty agreements and state banks cannot and will not be in position to validate those. Yes, what state Bank can do and should do to hire and telco consultant who guide SBP while assessing the technical and royalty agreements for go-ahead and registration.

  • Of course they were doing it… they never had any record of the tax they submitted to the government… they all are choors

  • Another thing I hate about this FDI is that they invest to make profit and send it back they don’t come to help Pakistan in any way… government should give favors to local companies in tax breaks and low licensing fees so that this doesn’t happen

  • Soon all multi nationals will be charging us in dollars. Just like all five star hotels that have already begun this since last year. They’ve stopped charging in rupees, if I am correct.

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