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ISLAMABAD: M/s CM Pak (Zong) continued to use illegal temporary additional compensatory spectrum after the expiry of its 2G (GSM) license in October 2019 till date, having a financial impact of Rs 53.547 billion, the audit report revealed.
The Frequency Allocation Board (FAB) under the Cabinet Division, Islamabad, allocated temporary additional compensatory frequency spectrum to M/s China Mobile Pakistan Ltd (Zong) for its 2G (GSM) license during its 30th Board meeting held on 8th September, 2007, due to cross-border interference from Indian CDMA networks, which affected Zong’s service in the border areas of the Punjab and Sindh.
The allocation was initially for one year, extended by three years, and subsequently extended till the expiry of the 2G (GSM) license in October 2019 as decided in the 42nd Board meeting of FAB on 9th February 2016, which was communicated to M/s CM Pak vide letter dated 11th March 2016.
The audit examined the relevant record and observed that:
i. M/s CM Pak (Zong) continued to use illegal temporary additional compensatory spectrum after the expiry of its 2G (GSM) license in October 2019 till date, as evident from monitoring reports issued by FAB during September 2024.
ii. M/s CM Pak used this temporary additional frequency for the provision of LTE (4G) services after 2014 in violation of the terms and conditions of its 2G (GSM) license. Further, the additional frequency was being used at places other than the affected border areas of the Punjab and Sindh.
iii. PTA issued an enforcement order on 14th December, 2020, and directed the operator to vacate the frequency spectrum and make payment for illegal use at the rate of US$29.5 million per MHz as fixed in the policy directive dated 9th May, 2019, for the period after the expiry of its 2G (GSM) license.
iv. In the light of the PTA enforcement order, an amount of Rs 18,042,200,000 {(US$29,500,000/15 x 5) x 6.6 MHz) x Rs 278 per US$} was required to be recovered from M/s CM Pak Ltd for the period from October 2019 to October 2024.
Despite this, neither was the frequency spectrum vacated/cancelled by FAB nor were the spectrum utilization charges recovered by PTA from the operator, notwithstanding the dismissal of the writ petitions by the Honorable Islamabad High Court on 21st August, 2024, with the cost of legal proceedings.
Audit contends that illegal use of spectrum by M/s CM Pak (Zong) beyond the expiry of its license not only violates regulatory requirements but also results in significant financial loss to the national exchequer. Audit reported the matter to the management and PAO during October & November 2024. It was replied that M/s CM Pak challenged the decision of the Honorable Islamabad High Court in the Honorable Supreme Court of Pakistan (SCP).
M/s CM Pak signed the license of PTA on 4th October, 2024, in compliance with the orders of the SCP. Extensive negotiations and discussions were conducted with M/s CM Pak to reach a mutually acceptable solution. Unfortunately, no consensus was achieved. Enforcing the spectrum vacation in the presence of status quo orders would constitute contempt of court. Recovery of payment for the use of additional spectrum was the mandate of the PTA and would be processed as per the orders of the SCP.
The management admitted the audit contention; however, the amount was not recovered from the operator despite the signing of the license in light of the Honorable Supreme Court orders. The matter was discussed in the DAC meeting held on 27th December, 2024. The DAC directed the FAB management to pursue the court case vigorously, and the results thereof were to be shared with the audit.
No further progress was intimated till the finalization of this report. The audit recommends implementation of DAC directives.
The issue was also reported earlier in the Audit Report(s) for Audit Year(s) 2015-16, 2017-18 & 2019-20 vide Para(s) No. 2.4.1, 2.4.1 & 2.5.3, having a financial impact of Rs 53,547.800 million. Recurrence of the same irregularity is a matter of serious concern.
To ensure uninterrupted service, the Frequency Allocation Board (FAB) had temporarily allocated additional spectrum to Zong, which was extended repeatedly over the years. However, the Pakistan Telecommunication Authority (PTA) later directed the operator to vacate the spectrum and imposed penalties. Zong contested the decision, maintaining that the dispute stems from technical and legacy interference challenges. The case is currently pending before the Supreme Court of Pakistan.
