New Delhi/Mumbai: India’s second largest mobile phone company by subscribers, Reliance Communication Ltd, or RCom, has been accused by government-appointed auditors of under-reporting revenue to save on licence fees and inflating numbers to the stock exchanges. The Anil Ambani-controlled company rejected the report’s conclusions, calling the auditor’s comments biased.
Jaipur-based audit firm Parakh and Co., which was asked to carry out a special audit of RCom by the department of telecommunications (DoT), has informed the ministry about its findings. The company sought to avoid paying around Rs316 crore in licence and spectrum fees in the two years ended 31 March 2008, the auditor said.
Under the lens: An RCom outlet in Bangalore. The firm sought to avoid paying Rs316 crore in licence and spectrum fees, the auditor said. Hemant Mishra / Mint
There was a difference of Rs2,915 crore in the revenue reported to the regulator and stock exchanges, with the bourses being given a higher figure, according to the audit report, which was reviewed by
Mint and received in parts from three separate sources on condition of anonymity. The report could not be independently verified.
The government said it was yet to examine the results of the inquiry.
“The report on the special audit being carried out has been received. The report is at present sealed and will be opened and examined in good time,” said a senior DoT official on condition of anonymity as he’s not authorized to speak to the media.
An official close to the auditing firm confirmed that the ministry was yet to call on Parakh to discuss the report that was submitted on Thursday and hence, was unwilling to discuss details.
RCom refuted the findings.
The “special auditor has not discussed the report or the findings with RCom nor provided a report copy”, a company spokesman said in an emailed response to Mint and the “auditors’ alleged comments are biased and appear instigated by corporate rivals. (The) premature leakage of the confidential report” showed the “auditors’ prejudice/bias”.
RCom said no communication had been received from DoT on this and “all revenues for FY07 (2006-07) and FY08 (2007-08) were correctly reported in RCom’s audited accounts”.
The latest discovery has come at a time when the Indian telecom sector—with 494 million subscribers—is in the middle of an intensifying tariff war and RCom, the latest entrant in this price game, lowered call charges to 50 paise a minute. RCom has 84.11 million subscribers, second to Bharti Airtel Ltd’s 107 million.
RCom went under the DoT scanner after a July 2008 Kotak Securities Ltd report pointed to discrepancies between revenue reported to the stock exchanges and the Telecom Regulatory Authority of India (Trai). DoT later expanded the audits to cover other phone firms such as Bharti Airtel, Vodafone Essar Ltd, Idea Cellular Ltd and Tata Teleservices Ltd after Trai found discrepancies. All the reviews pertain to fiscal 2007 and 2008.