TRAI Appointed Auditors Accuse RCom For Under-Reporting Revenues
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Telecom operators have long been accused for under reporting their revenues. This time Reliance Communication seems to be the casualty. TRAI appointed auditors have accused RCom for under reporting wireless revenues for FY 2006-07, 2007-08.
The under reporting is to the tune of Rs 2,799.19 crore for two years costing the government Rs 315.9 crores in terms of license and spectrum fees. Telecom operators shell out certain percentage of wireless revenues as license and spectrum charges, thus under reporting of revenues helps them in evading taxes.
TRAI started the practice of re-examining of financial books as they found certain discrepancies in revenues reported to it by Telcos and differential numbers reported to Investors and stock exchanges. The examination of financial numbers were done for all the major telecom companies namely Bharti Airtel, Tata, Vodafone-Essar, Reliance Communications, and others.
The real revenue numbers submitted by RCom to stock exchange stands at Rs 15,213 crores against Rs 12,298 crores (reported to TRAI) for FY 2007-08. The auditors have blamed certain practices such as booking expired pre-paid cards revenues utilized by group companies (Rs.379 cores) and revenues from sharing dealer network with Reliance Communications Infrastructure Ltd as major reason for differential numbers. The company has also been booking other income and income from sale of discounted debt as wireless income reported to stock exchanges.
RCom spokesperson denied receiving any letter from DoT and said, “The auditors’ alleged comments are biased and appear instigated by corporate rivals. The premature leakage of a confidential report to media reflects the special auditors’ prejudice/bias,” the spokesperson said.
Telecom operators declare many of their other incomes as wireless revenues to investors but under-reports it to TRAI. This is the bone of contention for the telcom authority. This case could also see flurry of similar cases as such practices might be adopted by other telcos too. RCom will also have to face the wrath of telecom authority as under-reporting of such huge revenues cannot be deemed a minor mistake as those revenues also misinformed the investors at large.
TRAI in order to avoid any future discrepancies should come out with a notification to define in details exactly what wireless revenues should constitute. This would help in bringing greater transparency for investors and even help government in clearly identifying the tax liabilities rather than auditing the books multiple times.
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