LAHORE: The Auditor General of Pakistan will undertake a special audit of the overall performance of the Pakistan Telecommunication Authority (PTA) as a regulator, and investigate allegations of irregularities in the sale of 3G and 4G spectrums in April 2014 and June this year.

The audit will be conducted in December this year, an official of the Directorate General of Audit, Posts, Telegraphs and Telephones (DGPTT), told Dawn on Thursday. “The AGP has already approved the special audit of the regulator. It is going to be a huge study,” he added.

The official said the audit was being conducted because the authority did not cooperate with an audit team of the DGPTT, deputed in April this year to investigate the 2014 sale of 3G/4G spectrum licences, and declined to provide recordings of conversations between the regulators, officials of the ministry (of information technology and telecommunications) and bidders during the auction.

The auditors believe that the “recorded conversations could shed some light on the factors/reasons that had led the regulator to agree to split one lot of 10MHz of 3G in the 2100MHz band into two lots of 5MHz each during the 2014 spectrum auction to accommodate the participating telecom companies at the cost of competition amongst the bidders”.

“We had to recall our auditors after five days because the PTA did not provide them the required recordings, saying those were already in possession of the ministry of IT and telecommunications. The recordings are important to find fresh ‘clues’ to allegations of wrongdoing and violations committed in the process of spectrum auction,” the DGPTT official argued.

“The new audit will also look into the circumstances in which another lot of 10MHz of 4G in the 850MHz band was sold without generating competition at its base price in June this year to the single bidder, although the PTA has the powers to cancel the auction if only one bid is received,” he said.

The AGP had authorised a special investigation of the 2014 auction to build on the findings of an earlier audit carried out months after the sale of the spectrum licences. The auditor at that time had “found several irregularities and violations in the spectrum auction that resulted in a significant financial loss to the exchequer owing to elimination of competition”.

The report, which is available with Dawn, points out that two bidders had “diverged considerably from their initial intentions indicated in their sealed bids” and remained “inactive” during the bidding process. But instead of penalising them _ a requirement under the auction rules _ the PTA “rewarded” them by splitting up one lot of 10MHz of 3G into two lots of 5MHz each and allocating one each to them at the base price of $147.5 million.

This action alone eliminated competition among the four bidders and everyone walked away from the auction with a spectrum licence acquired at significantly lower than expected prices, said the DGPTT official. “Consequently, one company was able to acquire 10MHz of 3G for just $300.9m and another one for $306.9m – slightly above the base price of $295m, but much lower than the projected price of $400m.

Moreover, one of the mobile companies was able to obtain 10MHz of 4G spectrum for $210m as another company, the only other operator which had shown interest, decided against competing once the auction went under way.

Published in Dawn, August 5th, 2016