RCom rejects special auditor’s claim of additional liability

RCom rejects special auditor’s claim of additional liability
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First Published: Mon, Oct 26 2009. 12 52 AM IST

Denying charges: RCom says Rs160 crore of the said additional financial liability relates to industry issues that apply to all phone firms. Hemant Mishra/Mint
Denying charges: RCom says Rs160 crore of the said additional financial liability relates to industry issues that apply to all phone firms. Hemant Mishra/Mint
Updated: Mon, Oct 26 2009. 12 52 AM IST
New Delhi: Reliance Communication Ltd (RCom), India’s second biggest phone company by users, said it won’t need to make any additional payments following a government-ordered audit that said the firm had misreported earnings for the 2006-08 fiscal years.
The Reliance Anil Dhirubhai Ambani group company “strongly affirms that it anticipates no additional financial liability towards licence or spectrum fee”, according to an email release issued Sunday evening. “The special auditor’s report estimating alleged additional liability of Rs316 crore is incorrect, hopelessly biased, one-sided and prejudiced.”
Denying charges: RCom says Rs160 crore of the said additional financial liability relates to industry issues that apply to all phone firms. Hemant Mishra/Mint
An official at the department of telecommunications (DoT), which had ordered the audit Jaipur-based Parakh and Co., declined to comment.
DoT has sought an audit of all the major telecom companies, including Bharti Airtel Ltd, Vodafone Essar Ltd, Tata Teleservices Ltd and Idea Cellular Ltd.
The auditor said RCom’s additional liability came from the difference in figures reported by the company to the Telecom Regulatory Authority of India (Trai) and stock exchanges.
The auditor said the mismatch pertained to the payment of revenue share and licence and spectrum fees to the government. The auditor has also said there had been irregularities in the accounts of RCom’s affiliates, Reliance Communications Infrastructure Ltd, Reliance Telecom Ltd and Reliable Internet Services Ltd.
“The special audit has nowhere recorded a finding that there was any inflation of revenue by RCom, as incorrectly alleged in a section of the media,” RCom said.
The firm said Rs160 crore of the said additional financial liability relates to industry issues that apply to all phone companies. Of this, Rs90 crore has been pegged as the additional liability towards licence fees on discounts allowed by the company. RCom, while dismissing the liability amount, has claimed that the said item does not attract any licence fee as per industry norms. It also cites a judgement of the Customs, Excise and Service Tax Appellate Tribunal, or CESTAT, in a case involving RCom to buttress its argument.
For the remaining Rs70 crore, which the audit report claims as additional liability towards licence fees on income such as foreign exchange gains, interest and dividends earned by the company before it got the licence, RCom cites the Telecom Disputes Settlement and Appellate Tribunal or TDSAT judgement allowing telecom operators to consider only income from wireless operations for stating the adjusted gross revenues or AGR.
The government, through DoT, had sought a stay on the TDSAT order, which was granted by the Supreme Court in 2008 and the case is still being heard by the apex court. Under the current government policy, telecom operators are required to pay anywhere between 2% and 6% of their AGR as licence fee depending on the circle they operate in and 6-10% of AGR as spectrum usage charge.
Shauvik Ghosh contributed to this story.
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First Published: Mon, Oct 26 2009. 12 52 AM IST