The special auditors appointed by DoT have reportedly pointed out some glaring irregularities in the accounts of RCom.
The special auditors appointed by the Department of Telecommunications (DoT) to look into the alleged evasion of licence fees by telecom operators has reportedly pointed out some glaring irregularities in the accounts of Reliance Communications (RCom). Reports on the audit of other telecom operators are not yet available.
The audit report, which RCom says it has not received as yet, alleges that RCom inflated its revenues in accounts sent to shareholders while showing much lower figures to Trai, thus underpaying licence and spectrum fees.
Auditors Parakh & Co say that during 2007-08, RCom’s actual wireless revenue was Rs 12,298 crore, but it inflated the figure by 23% to Rs 15,213 crore while reporting performance to shareholders, leaving a gap of Rs 2,915 crore.
For the same year, the company under-reported its revenues to Trai, as a result of which it allegedly evaded licence fees and spectrum charges worth Rs 224.79 crore.
In 2006-07, RCom allegedly under-reported revenues to the regulator, leading to a loss of Rs 91.11 crore to the exchequer. So, in the past two years, the government is estimated to have lost around Rs 315.90 crore in licence fees and spectrum charges from RCom alone.
An RCom reponse to the audit report said corporate rivals were behind the leak of the information. But it refuted any inflation of revenues. RCom says that it had itself disclosed the divergence between the revenues disclosed to Trai and the numbers disclosed in the financial reports.
Telecom companies pay annual licence fees and spectrum charges to DoT based on their UASL (united access service licence) revenues. All service providers need to report their revenues under various heads to Trai.
While pointing out that the special auditor had not discussed the report or its findings with RCom, a company official said that all revenues for the financial year 2006-07 and 2007-08 were “correctly reported in RCom’s audited accounts. RCom has stressed that it is “in full compliance of licence terms and conditions” and that the “alleged comments of the special auditor do not reflect any under-reporting of revenue share or licence fee”.
While RCom was the first company to be audited, DoT has decided to broadbase the scrutiny subsequently. While some telcos clubbed non-voice revenues with internet services, others were found to be showing unusual growth in revenues under the long-distance segment. The annual licence fee to be paid to the government for access services (local mobile) is much higher than the 6% of revenues charged for long-distance services.
“We received complaints about some other operators, so we decided to order an audit into the accounts of all leading telecom operators,” said a senior DoT official. Audit reports into the accounts of Bharti Airtel, Vodafone, Idea Cellular, and Tata Teleservices are awaited.
According to the RCom audit report, “there has been under-reporting of revenue for the purpose of payment of revenue share and under-payment of licence fee and spectrum fees”. It has further said that, “some of the revenues accruing to the companies which are liable to be recognised as revenue in accordance with AS-9 (accounting standard-9), has not been recognised so, and in particular, the companies have netted off the discount in the nature of commission on sale of pre-paid cards and accounted only the net realised consideration as revenue, which has an adverse impact on the AGR (gross revenues), licence fee and spectrum charges.”
The auditor has added that the “reconciliation of wireless revenue between the revenue reported by the company on a consolidated basis to the stock exchanges and the wireless revenues reported to Trai reveals that the consolidated wireless revenue earned as accounted in the books by RCom and its subsidiaries from provision of wireless services to wireless subscribers in India under the UAS licence is Rs 12,298 crore in 2007-08, as against the consolidated revenue reported under wireless segment of Rs 15,213 crore.”
DoT has confirmed the receipt of the auditor report on RCom but is yet to study it, according to an official.
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