RComm's books to be scrutinised by DoT-appointed auditor

The Department of Telecom has appointed Mumbai-based auditor Parekh & Co to scrutinise the accounts of Reliance Communications and its subsidiaries under a special audit. The auditor was appointed by the Controller and Auditor General of India (CAG) at the behest of DoT.

The purpose of the audit is to ascertain if there is any violation of revenue reporting norms to avoid payment of licence fees. DoT sources said Parekh & Co was selected out of the five shortlisted firms that included Chhajed & Doshi, Nayak & Kishnadwala, Varma & Varma and G D Apte & Co.

Reliance Communication has been allegedly passing on the low revenues to TRAI. The motive behind this inconsistency could be to save the annual licence renewal fee, which is based on revenues generated by a company.

The GSM lobby, Cellular Operators Association of India (COAI), brought this matter to light. Reliance Communication has been inconsistent in its revenue reporting, with financial disclosure figures differing from those sent to the Telecom Regulatory Authority of India.

The Cellular Operators Association of India had earlier pointed out to the government that Reliance Communications was showing its income from non-voice services under the internet licence even though the facility was being provided through the cellular network.

The COAI's observation was based on a report Swiss financial services firm UBS, which said that Reliance Communications reported revenues of Rs3,160 crore to the telecom regulator in June 2008 but showed revenues of Rs4,118 crore in its financial statements. The reason for the discrepancy is that Reliance Communication reports all its non-voice revenues through one of its subsidiary that has an ISP status.

In its defence Reliance Communication has said that DoT requires only limited reporting of revenues arising from activities covered by the UAS Licence. The financial report presented to the shareholders and to the stock exchanges requires reporting on a different basis.

Telecom secretary Siddharth Behura is said to have commented that, a number of complaints have been received on the aggregate gross revenue reported by Reliance. In these conditions, the government may invoke clause 22.6 of the licence agreement to conduct a special audit.
If found guilty Reliance Communication will face a stiff fine.

Reliance Communication has strongly refuted the allegation and has said that there it was not involved in cross booking of wireless revenue while adding that the company had paid all the necessary the necessary license and spectrum fee as applicable.

The statutory auditors include BSR & Company, associated with KPMG International, and Chaturvedi & Shah, associated with Nexia International. The auditors have approved the company's calculations and accounts and there have been no adverse comments by the auditors.