DoT appoints independent auditors to examine 4 telcos’ books

Business Daily from THE HINDU group of publications, Wednesday, May 13, 2009

New Delhi, May 12 The Department of Telecommunications has appointed independent auditors to look into the accounts of Bharti Airtel, Idea Cellular, Vodafone Essar and Tata Teleservices to check whether they had paid lower licence fees to the Government. One of the auditors being proposed by the DoT is Contractor Nayak & Kishnadwala.

The move follows recommendations made by the Telecom Regulatory Authority of India asking the DoT to examine Airtel’s revenue reporting in the long-distance telephony segment.

The regulator had noted that there was a shift in Bharti’s revenues to the long-distance segment, which attracts only 6 per cent licence fee as against a maximum of 10 per cent in the case of mobile services.

The auditor has been asked to examine whether the company has for 2007-08 and 2006-07 correctly presented the revenue data in their quarterly and annual statements and whether the company has paid various charges due to the government.

“TRAI has raised a doubt that the company (Bharti Airtel) is shifting the revenue of mobile segment to long-distance segment. To clear the doubt raised by TRAI, it is suggested that we get conducted the special audit of the licencee company,” said an internal DoT note. Similar audit is already under way on Reliance Communications’ accounts.

Large integrated players are increasingly using differential licence fee to pay lower revenue share to the Government. In the current licence fee regime, telecom companies are required to pay only 6 per cent of the annual revenues from long-distance services compared to an average levy of 10 per cent, including spectrum charges, for mobile services.

These companies are saving on the net outgo to the Government by loading higher revenue component to the licence with lower revenue share.

The regulator had suggested that integrated telecom players, which offer a whole range of services, should be asked to submit the break-up of income from their various stand alone subsidiaries to determine the revenue share payable to the Government.

The regulator has proposed that the DoT should carry out special audits of the operator’s account books every 3-5 years.