PTA Drafts Law for Telecom Licensees to Have Separate Accounts

Pakistan Telecommunication Authority (PTA) drafted “Accounting Separation (1st Amendment) Regulations, 2024” under which the licensee(s) holding fixed and mobile licenses shall maintain separate accounts for each category of the license. The draft regulations stated that the licensee shall prepare annual Separated Accounts for the following Business Units as defined to these Regulations; For fixed network, account(s) shall be further disaggregated into Access Network and Core Network. The Licensee is required to prepare Separated Accounts of its Retail activities pertaining to licensed services. All non-licensed activities may be reported as “Retail – Remaining Activities”. An example would be the main disaggregated activities under the “Retail” business unit. When providing licensed services (retail level) to the wholesale licensee (e.g. Mobile Virtual Network Operator), the Licensee providing such services should maintain an underlying Accounting Separation system that is capable of substantiating the levels of costs and those which are avoided by wholesale service provisions. The Significant Market Player (SMP) operators shall maintain appropriate cost accounting systems to achieve this regulatory obligation by the Guidelines on ‘Cost Accounting Methodologies for Accounting Separation Purposes, 2007’. The Separated Accounts shall contain a sufficient degree of separation as to allow for costs and revenues of each Licensed Service. For clarity for these Regulations, the Authority or the officer(s) of the Authority may issue directions/clarification or instruction(s) from time to time, including but not limited to the following: For preparation of Separated Accounts for business activities as provided at Regulation 4 of these Regulations, the Licensee shall apply the Regulatory Accounting Conventions as under: Cost Causality: The use of a specific allocation basis may not be necessary if the effect of allocation is not material to the outcome, either individually or collectively with other cost allocations using the same allocation base. However, it may not be possible to measure the effect without adopting an alternative basis, and, in cases of doubt, the most appropriate activity-related cost allocation basis should be used. For clarity, materiality is to be considered in its overall impact on the product/service. If the product/service is going to change the user’s perspective, the cost will be considered material. The Licensee shall prepare separate accounts as per the following principles: For each Business Unit, the Licensee shall report to the Authority regarding the following in the prescribed formats: The Profit and Loss statement shall disclose revenues and operating costs from each business activity. The profit under each account shall be stated before interest and tax. All accounts shall show any transfer charges to or from other business units. The Balance Sheet shall provide the breakdown of fixed assets, current assets and current liabilities. The Balance Sheet figures should be the average values for the period to which the Balance Sheet relates. For ease of reconciliation with the Licensee’s statutory accounts, the average may be calculated simply from opening and closing balance sheets for the period.