In the aftermath of the Satyam accounting fraud, the department of telecommunications (DoT) is not taking any chances. It has decided to finalise the auditor for conducting a special audit of Reliance Communications Ltd (RComm) books, on charges of concealing real revenues to pay a lower share to the government, only after ascertaining that the selected auditor has no relationship with RComm and its holding companies. Four firms have been shortlisted by CAG.
DoT has also decided that the compensation paid to the auditor will have to be borne by the Anil Ambani-led company.
DoT is in the process of conducting a special audit as there have been charges that RComm in the last financial year had diverted revenue earned from its mobile services to a subsidiary in an attempt to bring down the total amount it had to pay the government as licence fee and spectrum charges. According to the norms, a mobile operator has to pay 6-10% of the revenue as licence fee and another 2-4% as spectrum charges. However, operators do not pay any licence fee on revenue earned from Internet services. It was alleged that RComm was showing revenues through SMS and MMS under its ISP licence. DoT has noted that SMS and MMS are not covered under the ISP licence.
DoT also referred the matter to the Telecom Regulatory Authority of India (Trai), which in its report pointed towards the discrepancies.
The discrepancy was to the tune of 23%. On its part, RComm has consistently maintained that it has not committed any wrong and any such analysis is flawed.
To select the auditor, DoT had referred the matter to the Comptroller & Auditor General of India (CAG), which has short-listed four auditors for scrutinising RComm?s accounts.
Though nine firms selected by CAG initially responded, four firms, namely, Chhajed & Doshi, /s Parekh & Co, Contractor, Nayak & Kishnadwala and Varma & Varma, responded with quotations and the credentials of these four are now being scrutinised to find out whether they have any relationship with RComm or its holding companies.
The Cellular Operators Association of India (COAI) too had earlier alleged that RComm was stating its income from non-voice services such as SMS and MMS under the ISP despite being provided through the cellular network.
According to a report by UBS Securities Asia Ltd, which sparked the debate, RComm reported revenue of Rs 3,160 crore to Trai in June 2008 but showed revenues of Rs 4,118 crore in its financial statements.
In one of the findings, RComm had reported ?significantly lower revenue to Trai than what it filed with the stock exchanges.?
However, RComm replied that this was due to different reporting requirements of the regulator and the stock exchanges. Since revenue reported by the company to the regulator relates to the stand-alone operation of RComm, the revenue reported to the regulator did not include revenue from its telecom subsidiaries—Reliance Telecom Ltd and Reliance Internet Services Ltd—unlike the revenue reported to the stock exchanges that included it.
However, Trai found that Reliance?s other telecom subsidiaries ?have no access and long distance service licence? and so the revenue reported from wireless telecom services with the stock exchanges must be same as that reported to Trai.
