Following a forensic audit conducted on the National Frequency Management Unit (NFMU), it was revealed
Managing Director of E-Networks Vishok Persaud
that two of the major providers of cable services in Guyana – E-Networks and Quark Inc (Movie Star) – reportedly owe $60 million in broadcasting fees.
According to the audit report published on the Finance Ministry’s website on Friday, E-Networks owes $31 million while Quark Inc owes $29 million for spectrum usage. The forensic audit was conducted by Ram and McRae Chartered Accountants.
According to the accounting firm, a number of operational issues were discovered in the accounts department, particularly in the areas of billing and debt management. These issues, the auditor found, were mainly due to the fact that the department was not complying with its Standard Operating Procedures (SOPs); thus resulting in some 264 credit balances to the value of $66.5 million at the end of May 2015.
The report outlined that E-Networks had not been billed for several years and it was explained that no invoice could be issued without the Prime Minister, who is the subject Minister, having agreed to the amount chargeable.
Moreover, the audit report stated that since its establishment in April 2004 to provide wireless Internet
Managing Director of MovieStar Brian Young
service, the NFMU had to issue warnings four times to E-Networks during the period April 4, 2004 to February 18, 2007, for operating telecommunications equipment to provide Internet and television service without ownership of the relevant licences.
“Throughout the period… E-Networks ignored the requests for compliance from the NFMU and did not properly apply for a Post and Telegraph Licence until December 2007,” the report stated while adding that “no action was taken to ensure compliance and no payments were made to the NFMU until December 4, 2007.”
It was further highlighted that the company provided wireless Internet services to their customers without being licensed to do so during the period 2004-2007 and was broadcasting cable TV without ownership of a broadcasting licence during 2006-2012.
Ram and McRae further noted that no spectrum fees were billed to E-Networks for the 2.5 GHz band used to supply cable TV during 2010-2013 and that the NFMU invoiced E-Networks $7,560,000 for spectrum used to broadcast cable TV during the year 2014.
In light of these revelations, it was recommended that immediate steps be taken to determine and recover the full amount owed.
As it relates to Quark Inc (Movie Star), Ram and McRae disclosed that during the forensic audit, they discovered that the company has outstanding debts to the NFMU dating back to 2004 for spectrum used to provide broadband Internet services, however at the same time it was found that the Unit failed to issue any invoice to the company for spectrum usage since May 23, 2007.
The report explained that the estimated $29 million owed by Quark Inc is in comparison with a balance of $3,535,000 as stated in the Aged Receivable Listing. Like in the case of E-Networks, the NFMU management explained they were awaiting a determination of the fee structure by the Prime Minister.
“We believe that the amount owed is substantial and recommend that immediate steps be taken to determine and recover the full amount owed,” Ram and McRae stated in its report.
In 2002, Quark Inc 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.
According to the accounting firm, 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 since no invoice was sent prior to this even though the company was utilising spectrum to provide Internet services.
Ram and McRae noted that the company was required to pay $2,235,000 for the period April 1, 2002 to December 31, 2004 and $1,200,000 was paid on September 14, 2004 while an additional payment of $235,000 was made on November 29, 2004. A balance of $800,000 is still outstanding, the report stated.
Furthermore, it was outlined that another invoice of $1,300,000 was sent to Quark Inc on September 28, 2005 for the period ending December 31, 2005. Of this amount, $800,000 was paid on January 17, 2006, leaving a cumulative balance for the two years of $1,300,000.
The auditor went on to say that on April 5, 2007, NFMU Managing Director Valmikki Singh emailed the owner of the cable company, indicating that the Unit was aware that Quark Inc was operating a number of sites and issued to the company an invoice for another $5,200,000 for the years 2006 and 2007. This invoice included estimated charges for undeclared sites amounting to $2,600,000.
However, on May 23, 2007, the cable company paid $500,000 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 December 31, 2012-2014 and May 31, 2015.
Ram and McRae said 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.
The auditor pointed out that since the NFMU did not have an application form tailored to cable TV operators, Quark Inc wrote them requesting the use of frequency spectrum but all the necessary information was not provided to complete the application process.
It was explained to Ram and McRae 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 further compound the matter, the auditor underscored that since Quark Inc has made no payment to the Guyana National Broadcasting Authority (GNBA), it is therefore not a licensed broadcaster.
