NFMU used special ‘Government formula’ to determine payment by companies

May 26, 2016 News

Forensic auditors have discovered that the former Government, in agreement with the National Frequency

Forensic auditor,
Chris Ram

Management Unit (NFMU), applied a “special” formula to the rates that were supposed to be charged on telephone companies, specifically the Guyana Telephone and Telegraph Company (GTT).
The auditors from Ram and McRae were concerned that a special formula was used thereby overriding the fact that the law provides a statutory basis for the collection of fees from telephone companies. They said that this “formula” that was used by the past administration could vary by tens of millions from the statutory fees.
They said that what was also worrying was that NFMU failed to resolve the matter in a timely manner and to ensure that the rates charged were gazetted.
The auditors recalled that TDMA technology was introduced in Guyana by GTT during September 2004. It was later offered by U-Mobile in November 2004. The new technology required the use of frequency spectrum in the 800MHz to 900 MHz bands which is regulated by the NFMU.
The forensic auditing team said that the introduction of the TDMA mobile technology by GTT forced the former Prime Minister, Sam Hinds and the NFMU to create and implement a formula as a base on charging the telephone company for spectrum usage.
They said that the special formula was produced during 2004 and was often referred to as the “Hinds Formula”. In its report they detailed the formula to be: ($1944 X 60 per RF [30 kHz] channel per Cell Site).
The auditors emphasized that the fee structure for the spectrum used by licencees is set out in the Post and Telegraph Act. That Regulation was modified by Regulation 5 of 2013 published in the Official Gazette of November 9, 2013, imposing an Annual Licence Fee computed by applying a Base Factor times an Area Fee Factor.
Notwithstanding, the Hinds Formula was not included in the new Regulation 5 of 2013.
The Ram and McRae team said that during September 2004, GTT managed 142 Cell Sites, while U-Mobile launched with 114 Cell Sites in November 2004. During November 2004, the NFMU calculated annual licence fees using the Hinds Formula.
In their report, auditors said that NFMU Head, Valmiki Singh, made it known that the telecommunications providers represented to the former Prime Minister that the annual fees were exorbitant and ought to be negotiated.
By letter dated October 21, 2005 Mr. Singh sought confirmation from the Prime Minster that fixed fees of $120 million, $150 million and $180million would be charged to GT&T for the years 2005 to 2007 respectively.
The former Prime Minister signified his assent on October 26, 2005 and the amounts were invoiced.
One year later on November 24, 2006, the auditors said that Singh again wrote the Prime Minister recommending that in the interest of equity, fixed fees should also be established for U-Mobile. In that letter, Singh calculated a proposed fixed fee.
The former Prime Minister approved the proposal on December 8, 2006.
“Curiously, while Mr. Singh indicated to the former Prime Minister that the new formula for the GTT fees needed to be gazetted, his letter regarding Cell Star/U-Mobile contained no such assertion. Importantly, we confirmed with the NFMU that the new formula was never gazetted.
“With respect to fees for subsequent years, Mr. Singh informed Ram & McRae that it was NFMU’s intention to establish new fixed spectrum fees for the period 2008 to 2014 since both telecoms providers would have expanded operations,” the auditors said.
“However, it appears that no action was taken to revise the applicable fees or bill the companies for the years 2008 to 2014. In the absence of any invoices, GTT and U-Mobile both made payments on account during the period 2008 to March 2015, amounting to $720 million and $610.7 million respectively.
It was not until ten years later in the case of GT&T, and nine in the case of U-Mobile, that Mr. Singh on April 22, 2015 approached Dr. Roger Luncheon, former Head of the Presidential Secretariat, requesting confirmation of the Government’s approval of the annual spectrum fees for the period 2008 to 2015 for GT&T and U-Mobile to be the same as that invoiced for 2007 (GT&T – $180 million and U-Mobile – $135 million).”
The auditors said that the NFMU needs to address in some more logical and legal manner, the payment of fees by all telecommunication operators and to ensure that such rates are properly gazetted.