Jazz, PTCL, and Ufone Named as Auditor-General Flags Rs9.43 Billion in USF Irregularities

The Universal Service Fund exists for a specific purpose: to extend connectivity to Pakistan’s underserved and unserved populations, funded by mandatory contributions from licensed telecom operators, and governed by rules that are supposed to ensure public money translates into public benefit. The Auditor-General of Pakistan’s latest report on the USF irregularities, covering fiscal year 2024-25, raises serious questions about whether that purpose is being served and whether the fund’s management has the governance structures in place to ensure it is.

The total value of irregularities flagged in the report: Rs9.43 billion. The operators named at the centre of the findings: Jazz, Pakistan Telecommunication Company Limited, and Ufone.

The Biggest Finding: Rs7.46 Billion in Restricted Bidding

The audit’s most significant finding, both in financial scale and in regulatory implication, concerns the award of seven contracts under the Next Generation Broadband for Sustainable Development and Optical Fiber Cable programmes, valued collectively at Rs7.46 billion.

The audit found that USF restricted bidding for these contracts to telecom operators that contribute to the fund, excluding other potential participants from the competition. Under the Public Procurement Regulatory Authority rules, procurement must be open, competitive, and transparent. The audit’s position is that the USF Rules 2006, which mandate reverse auctions among eligible contributors, cannot override the PPRA procurement framework that governs public spending more broadly.

The five NG-BSD projects were awarded to Jazz. The two OFC projects went to Dancom. Whether or not the reverse auction process was internally competitive among contributors, the exclusion of non-contributors from participation is what the audit flags as a violation of PPRA principles of fairness, transparency, and value for money.

USF management rejected the finding, insisting that procurement was conducted under the special provisions of the USF Rules 2006 and remained transparent and competitive within that framework. Auditors described the explanation as unsatisfactory and recommended the matter be referred to the PPRA and the Law Division for legal clarification, effectively passing the question of which rules take precedence to the institutions best positioned to answer it.

The answer matters. If PPRA rules do override the USF’s internal procurement framework, the legal basis for Rs7.46 billion in contracts is in question. If USF rules legitimately operate as a special regime, the audit’s objection falls away. Either way, the ambiguity should have been resolved before the contracts were awarded, not after the audit found the gap.

Rs1 Billion in Tower Relocations Nobody Approved

The second major finding concerns Rs1.007 billion spent on relocating 33 mobile base transceiver station sites under projects awarded to Jazz and Ufone. The projects had been approved for specific districts in Punjab and Balochistan. The sites were moved to different districts, including locations outside the original telecom regions and, in some cases, outside the provinces entirely.

None of these relocations received prior approval from the USF Board. The audit found that the USF chief executive did not have the authority to authorise project movements of this scope, across districts and across provincial boundaries. Moving an approved connectivity project from one district to another effectively changes what the project delivers to whom, and doing so without board approval bypasses the governance layer that is supposed to ensure USF spending reaches the populations it was designed to serve.

Auditors described the relocations as evidence of weak planning and project management. The Departmental Accounts Committee directed USF management to seek post-facto approval from the Board, approval after the fact for decisions that should have been authorised before any site was moved.

Rs845 Million in Fibre That Nobody Is Using

Perhaps the audit’s most striking finding in terms of what it reveals about project planning and execution is the Rs845.17 million flagged in connection with two PTCL optical fibre projects in Sindh.

PTCL completed fibre connectivity to 246 mobile tower sites under these projects and received final milestone payments, meaning the work was technically delivered and signed off as complete. But auditors observed that telecom operators had shown no interest in actually using the newly laid fibre infrastructure. The investment has been made. The cables are in the ground. The towers have been connected. And the operators the fibre was built to serve are not using it.

USF management defended the expenditure, arguing that payments were made after technical verification and that the fibre network supports the government’s long-term fiberisation strategy. The defence has some logic; fibre infrastructure can have value over a longer horizon even if immediate uptake is low. But the audit’s conclusion was less forgiving: the projects reflected poor planning, and the auditors recommended a high-level inquiry to determine who bears responsibility for spending Rs845 million on infrastructure that the intended users are not utilising.

The irony of unused fibre in a country where Pakistan’s fiberisation targets remain far from achieved is difficult to ignore. If the government’s own connectivity fund is building fibre that operators will not connect to, something has gone wrong in the planning process that produced these projects.

PTCL’s Outstanding Contributions: Rs115 Million

The audit also found that the USF failed to recover Rs116.1 million in mandatory fund contributions from telecom operators. PTCL accounts for more than Rs115 million of that outstanding amount, meaning one company is responsible for nearly the entirety of the unrecovered contributions.

USF management noted that part of the amount had been recovered since the audit period and that the remaining PTCL dues are sub judice, currently subject to legal proceedings. The audit acknowledged this context but maintained that delayed recoveries, whatever their cause, weaken the financial health of a fund that depends on timely contributions to remain operationally effective.

A fund that cannot collect mandatory contributions from its own participants, particularly when one of those participants is a state-owned enterprise, has a structural authority problem that legal proceedings alone do not resolve.

Statutory Audit Requirement Not Met

The audit additionally found that USF management failed to have the fund’s accounts audited by a chartered accountant as required under the Pakistan Telecommunication (Re-organization) Act. The legislation requires dual audit by both a chartered accountant and the Auditor-General. One of those two audits, the one involving an independent chartered accountant, was not conducted.

This is not a procedural technicality. The dual audit requirement exists because the USF manages public money collected from the telecom industry and disbursed to operators for connectivity projects. External chartered accountancy audit provides an independent financial verification that is distinct from the AGP’s compliance-focused review. Its absence means the fund’s financial statements for the year were not subjected to the full scrutiny the law requires.

Pending Litigation and Unquantified Liabilities

The audit also flagged financial risks arising from ongoing litigation with PTCL over liquidated damages and descoping claims, as well as tax disputes over the treatment of government grants. USF management has not made provisions against these liabilities in its accounts, meaning the financial statements do not reflect the potential cost of adverse court decisions.

The audit warned that adverse rulings could expose the fund to significant financial risks that are currently invisible in its reported figures. Without provisions, the USF’s financial position looks better on paper than it may be in reality, a standard accounting concern that takes on additional weight when public funds and legal disputes of this scale are involved.

The AGP’s recommendations cover the full range of findings: referral of the PPRA procurement question to relevant legal authorities, post-facto Board approval for relocated BTS sites, a high-level inquiry into the unused PTCL fibre projects, recovery of outstanding operator contributions, enforcement of the statutory chartered accountancy audit requirement, and appropriate financial provisioning against pending litigation risks.

The recommendations are specific and actionable. Whether they are acted upon, and on what timeline, will determine whether this audit report functions as a genuine accountability mechanism or as documentation of problems that are acknowledged and left unaddressed.

The Bottom Line

The Universal Service Fund was created to solve one of Pakistan’s most persistent connectivity challenges: getting telecommunications infrastructure to the populations and areas that the market alone would not serve. Rs9.43 billion in audit irregularities, covering restricted procurement, unauthorised project relocations, fibre nobody is connecting to, and unrecovered contributions, raises a fundamental question about whether the fund is being managed with the rigour that public money and public purpose demand. Jazz, PTCL, and Ufone are named in the findings not necessarily as bad actors but as participants in a system whose governance, oversight, and planning processes the Auditor-General has found seriously wanting. Fixing those processes, not just responding to individual audit observations, is what the fund’s credibility and its connectivity mandate require.