The National Frequency Management Unit (NFMU) has failed to fully discharge its statutory responsibilities and millions have been outstanding to it from two cable companies with close ties to the former PPP/C government, according to forensic auditor Ram and McRae.
In a report released today on the Ministry of Finance website, Ram and McRae said that the NFMU failed to establish a long-term frequency management policy and failed to set up technical standards appropriate to Guyana.
The auditor said that a review of files showed that E-Networks and Quark Inc – controlled by persons with strong political connections to the former PPP/C government were not invoiced on a timely basis and ignored NFMU’s invoices for long periods.
The audit report added that the previous administration did not alter the current fees structure to include a method to calculate spectrum fees for cable TV providers and the NFMU did not invoice or request payments for frequency spectrum used by both entities to broadcast cable TV.
Following its request, the auditor said that the NFMU estimated that E-Networks and Quark Inc owed at December 31, 2014, $31m and $29m respectively.
Excerpts from the report follow:
3.3.4 Quark Inc. (Broadband) / Movie Star
On October 18, 2001, Mr. Brian Yong, owner and manager of Quark Inc. expressed to the then Prime Minister, Mr. Samuel A. Hinds his interest in investing in the country’s telecommunication sector by establishing an entity to provide digital TV transmissions and internet services. During the year 2002, Mr. Yong was granted a Post and Telegraph licence which permitted the provision of internet services only.
Subsequently, internet (Broadband) services were provided to the local population in accordance with the Post and Telegraph licence held.
The first invoice sent by the NFMU to Quark Inc. was dated July 29, 2004 for the period April 1, 2002 to December 31, 2004. Prior to this, no invoice was sent to Quark Inc. even though the Company was utilising spectrum to provide internet services. Mr. Yong was required to pay $2,235,000 for the period
April 1, 2002 to December 31, 2004. Of this amount, $1,200,000 was paid on September 14, 2004 and $235,000 on November 29, 2004. A balance of $800,000 is still outstanding.
On September 28, 2005, $1,300,000 was invoiced to Quark Inc. for the period ending December 31, of this amount, $800,000 was paid on January 17, 2006. The cumulative balance for the two yearsis $1,300,000.
On April 5, 2007, Mr. Singh emailed Mr. Yong indicating that the NFMU was aware that Quark Inc. was operating a number of sites and issued to the Company an invoice for $5,200,000 for years 2006 and 2007;the invoice included estimated charges for undeclared sites amounting to $2,600,000.
On May 23, 2007, $500,000 was paid to the NFMU, leaving a balance of $6,000,000.There is no evidence of further payments on the account but yet the Aged Receivables listing at May 31, 2015 reflect a constant balance of $3,535,000 for years and period ended 31 December 2012 –2014 and May 31, 2015.
We noted that there was subsequent correspondence between Quark Inc. and the NFMU which included written request for and approval of the use of additional frequency spectrum, application for spectrum to establish 4G TD-LTE network and issuance by Office of the President of a Mobile Network Code (MNC) for the usage of Mobile Country Code 738.
We were advised that In December 2010, former President Bharrat Jagdeo granted Quark Inc. permission to broadcast television signals on the 2.5 GHz band, which allows for cable TV operations and internet-related services. We are not aware, nor were we provided with any evidence that the President had any such authority. Additionally, since 2010, Quark Inc. also known as Movie Star has been providing cable TV and wireless internet services.
Since the NFMU did not have an application form tailored to cable TV operators, Quark Inc. wrote the NFMU requesting the use of frequency spectrum but complete information was not provided to complete the application process. Also, our reviews and enquires revealed that Quark Inc. did not pay any spectrum fees to the National Frequency Management Unit for the 2.5 GHz band used to broadcast for the period 2010 to 2015. It was explained that the reason is that the NFMU did not invoice Quark Inc. since the law does not provide a method to calculate fees for cable TV operators.
To compound the matter, since Quark Inc. has made no payment to the Guyana National Broadcasting Authority (GNBA) it is not a licensed broadcaster.
Notwithstanding the fact that the entity has debts to the NFMU dating back to 2004 for spectrum used to provide broadband internet services, the NFMU has failed to issue any invoice to that company for spectrum usage since May 23, 2007.
Management estimates an amount of $29 million is owed by Quark Inc. to the NFMU, compared with a balance of $3,535,000 stated in the Aged Receivable Listing. Management explained that it was awaiting a determination of the fee structure by the Minister.
We believe that the amount owed is substantial and recommend that immediate steps be taken to determine and recover the full amount owed.
3.3.5 E-Networks Inc.
E-Networks Inc. was established in April 2004 to provide wireless internet service. They were issued four warnings by the NFMU extending from April 4, 2004 to February 18, 2007 in respect of operating telecommunications equipment to provide internet and television service without ownership of the relevant licences.
Throughout the period stated above, E-Networks ignored the requests for compliance from the NFMU and did not properly apply for a Post and Telegraph licence until December 2007. No action was taken to ensure compliance and no payments were made to the NFMU until December 4, 2007.
We noted the following issues:
- E-Networks provided wireless internet services to their customers without being licenced to do so during the period 2004 – 2007.
- The entity was broadcasting cable TV without ownership of a Broadcasting licence during 2006 – 2012.
- No spectrum fees were billed to E-Networks for the 2.5 GHz band used to supply cable TV during 2010-2013.
- The NFMU invoiced E-Networks $7,560,000 for spectrum used to broadcast cable TV during the year 2014.
This company which is known to have a close relationship with the former Administration had not been billed for several years. The explanation offered to Ram & McRae is that no invoice could be issued without the Prime Minister, as the subject Minister, having agreed the amount chargeable.
Management estimates an amount of $31 million owed by E-Networks for spectrum usage. We recommend that immediate steps be taken to determine and recover the full amount owed.
