Zong, PTCL Cause Multibillion Rupees Loss to Exchequer

Audit report says PTA failed to recover dues; PTCL projects also under scrutiny

ISLAMABAD: The national exchequer has suffered a loss of Rs 18 billion due to the illegal use of additional radio frequency spectrum by M/s China Mobile Pakistan Ltd (Zong), according to audit findings reviewed by the Auditor-General of Pakistan. The lapse highlights persistent weaknesses in spectrum management and regulatory enforcement within the telecom sector, where major operators have repeatedly been found in violation of license terms.

The controversy began when the Frequency Allocation Board (FAB) allocated a temporary compensatory frequency to Zong during its 30th Board meeting on September 8, 2007. The allocation was intended to mitigate cross-border interference from Indian CDMA networks affecting Zong’s services in Punjab and Sindh border areas. Initially sanctioned for one year, the arrangement was later extended for three years and eventually prolonged until the expiry of Zong’s 2G (GSM) license in October 2019, as decided in the FAB’s 42nd Board meeting on February 9, 2016.

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However, audit scrutiny found that Zong continued to use the spectrum illegally even after its license expired in October 2019. FAB’s monitoring reports in September 2024 confirmed that the company had been deploying this frequency for LTE (4G) services since 2014, well beyond the scope of its GSM license. The reports further revealed that the usage was not confined to designated border areas, but extended into broader regions, violating both the intent and the limits of the compensatory allocation.

On December 14, 2020, the Pakistan Telecommunication Authority (PTA) issued an enforcement order requiring Zong to vacate the frequency and pay charges for illegal usage at the rate of US\$29.5 million per MHz, as stipulated in a government policy directive issued on May 9, 2019. The total recoverable amount was calculated at Rs 18,042.200 million for the period from October 2019 to October 2024. Despite this directive, neither was the spectrum vacated nor were the dues collected, even after the Islamabad High Court dismissed Zong’s petitions on August 21, 2024, imposing costs on the operator.

The audit report stressed that Zong’s continued illegal use of the spectrum constituted a violation of regulatory requirements and caused substantial financial damage to the state. Although the management acknowledged the audit’s contention, the recoverable dues remain unrealized. Zong later signed a new license agreement with PTA on October 4, 2024, under Supreme Court of Pakistan (SCP) directives. However, negotiations between the company and the regulator failed to resolve the pending issue. A Departmental Accounts Committee (DAC) meeting held on December 27, 2024, instructed FAB to pursue the matter vigorously in court, but no progress has been reported since.

The recurrence of spectrum misuse has been highlighted repeatedly in past audit reports, including those for 2015-16, 2017-18, and 2019-20, with a cumulative financial impact estimated at Rs 53,547.800 million. The repetition of the same irregularity despite multiple warnings underscores systemic regulatory lapses in spectrum oversight.

The audit report also flagged PTA’s broader failure to recover Rs 40 million in annual regulatory dues from telecom operators. Pakistan Telecommunication Company Ltd (PTCL) alone owes Rs 37 million. According to auditors, the non-recovery reflects weak receivables management and inadequate follow-up on enforcement actions.

Separately, the report criticized PTCL’s performance on projects executed under the Universal Service Fund (USF), an initiative of the Ministry of Information Technology and Telecommunication (MoITT) aimed at extending telecom services to underserved areas. One such project, signed under the Balochistan Package-2 agreement in June 2009 with a completion deadline of October 2010, was delayed by 2,929 days. Despite repeated extensions due to force majeure claims, PTCL only completed its final milestone in January 2020.

In September 2023, USF directed PTCL to deposit Rs 624.8 million in liquidated damages and de-scoping penalties, but the operator failed to comply and instead took the matter to court. Another agreement worth Rs 43.2 million was awarded to PTCL in September 2023 to connect two union councils in Quetta district, covering 28,658 people with 7.7 km of optic fiber cable deployment. The audit contended that this project was awarded in violation of Request for Application (RFA) rules, citing a lack of planning and assessment.

In addition, the report noted that PTCL repeatedly refused to provide its books of accounts for audit, despite explicit directions from the Supreme Court, the Public Accounts Committee (PAC), and the Auditor-General’s office. The refusal raised concerns about transparency and accountability in the handling of state-funded projects.

The audit concluded by recommending immediate enforcement of DAC directives in Zong’s case and strict recovery actions in outstanding dues from telecom operators. It also emphasized that repeated lapses in spectrum allocation and project execution pose a serious risk to the integrity of Pakistan’s telecom regulatory framework. Unless regulatory agencies strengthen enforcement, the sector risks further financial losses and credibility damage.

Zong’s spectrum misuse and PTCL’s audit non-compliance underline the broader challenge of governance in Pakistan’s telecom sector, where financial accountability and spectrum management remain pressing concerns for both the government and consumers.