Passing Bill Of Supreme Executive Order Approving General Criteria For Renewal Procedures Of Telecommunications Concession
On October 26, 2019, Ministerial Order No. 978-2019-MTC/01.03 was published in the Official Gazette “El Peruano”, whereby it is set forth to pass the bill of Supreme Executive Order approving the “Regulation establishing General Criteria for Renewal Procedures of Telecommunications Public Services Concession and Compliance Evaluation Methods” (“Bill”).
The Order provides 30 calendar days upon publication to receive pertinent comments and suggestions from interested parties. Below, main new aspects of the Bill are shown as follows:
1. As per concession agreement, renewal procedures are: (i)total renewal (one-time issue for 20 years additional to the concession period); and (ii) gradual renewal (issue every 5 years that added together shall not exceed 20 years additional to the concession period). The concessionaire can only select one of these procedures.
2. Renewal procedure starts by submitting the pertinent request within the following terms: (i)in case of total renewal, request shall be submitted at least one year before the end of the concession period; and (ii) in case of gradual renewal, request shall be submitted 6 months before a term of 5 years. If the concessionaire does not submit the request before deadline, this will be considered untimely and dismissed automatically.
3. Within the renewal procedure, the concessionaire will be evaluated whether having met main obligations under telecommunications sector. In this respect, the Bill classifies such obligations as per the authority of the involved entities: (i)obligations related to the authority of the Ministry of Transportation and Communications (“MTC”) and the National Personal Information Protection Agency; (ii) obligations related to the authority of Supervisory Body of Private Investment in Telecommunications (OSIPTEL); and (iii) obligations related to the authority of MTC and OSIPTEL. Obligation details of each entity are provided for by Section 9 and Bill Exhibit.
4. In this regard, it should be mentioned that the Bill establishes two methods to evaluate obligation compliance: (i)Regular Evaluation Method (“MER”); and (ii) Simplified Evaluation Method (“MES”). OSIPTEL will determine the method to be used based on the percentage of annual income generated by the concessionaire and/or the economic group which it belongs to in respect of the total annual income generated jointly with every operator of telecommunications public service market.
5. If, as a result of the fiscal year, in the year before the start of renewal procedure, income earned by the concessionaire and/or the economic group which it belongs to is equal or more than 1% of total income generated jointly with every operator of telecommunications public service market, MER will be applied. On the other hand, in the event income earned would be less than 1%, MES shall be applied.
6. The Bill emphasizes that MER enables to establish renewal period by calculating the difference between the maximum extension time that it can be granted, according to the selected renewal method, and the penalty time generated by breaches recorded during the evaluation period.
For such purpose, those penalties being imposed for breaching obligations that are final or have exhausted administrative remedies thereby, or that upon having been brought in court became res judicata within the pertinent evaluation period, shall be defined as serious and very serious penalties. For the purpose of granting renewal, penalty accrued by the concessionaire shall be less than or equal to the maximum amount of penalty. Forty-percent concession period being requested shall be considered as maximum amount of penalty.
However, in the event the maximum amount of penalties is exceeded, the concessionaire may request MTC to renegotiate the concession agreement in order to establish the terms and conditions of additional commitments thereto, in exchange for granting the renewal of the concession period for a term resulting from the difference between those five years having been evaluated and the calculated penalty.
7. On the other hand, regarding MES, the Bill states that this method allows to determine if the renewal of concession period is pertinent based on the compliance of payment obligations corresponding to Regulation Tax, Mining Tax, Annual Commercial Exploitation Tax and/or Tax regarding Telecommunications Investment Fund (FITEL). In this case, failure to pay or untimely payment for two consecutive years of said taxes within the pertinent evaluation period will be considered as breach.
