Reliance Comm revenue reporting comes under Central vigilance scanner

The Central Vigilance Commission has asked the Department of Telecom to investigate alleged irregular revenue reporting by Reliance Communications.

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 CVC has asked the DoT to submit a report within 12 weeks. Its action is based on a letter written by a Member of Parliament alleging irregularities in the way the DoT had handled the issue. “In exercise of powers conferred on the CVC- the Commission hereby directs that an investigation be conducted on the charges/irregularities pointed out in the enclosed complaint (the letter written by the MP). The report of this investigation should be submitted to the Commission within 12 weeks of receipt of this order,” said the letter from the CVC to DoT.

Senior DoT officials said that the CVC order was procedural in nature since an MP had lodged a complaint and an investigation was already under way in this regard.

While operators do not pay any revenue share for income earned from Internet services, they have to pay between 6 and 10 per cent of their annual revenue to the Government from mobile services. In addition, mobile firms also have to pay up to 4 per cent of the income as spectrum charges.

COAI had pointed out that an operator could make huge profits by showing income from data services under the ISP licence. According to the estimates made by the MP, who filed a complaint with the CVC, Reliance may have benefited up to Rs 352 crore by separating non-voice revenues. The same MP had earlier shot off several letters against Reliance-Anil Dhirubhai Ambani’s various businesses including Reliance Power and Reliance Energy.

The COAI’s observation was in turn based on a report by financial services firm UBS, which said that Reliance Communications reported revenues of Rs 3,160 crore to the telecom regulator in June 2008 but showed revenues of Rs 4,118 crore in its financial statements. “The main reason for the discrepancy between RCom reported revenues and the TRAI reported revenue is that RCom reports all its non-voice revenues through one of its subsidiary that has an ISP status,” said the UBS report.

In an earlier response to similar query, Reliance Communications had stated that its accounts have been duly audited and certified by internationally recognised auditors and are in full compliance with the prescribed reporting framework. The company had stated that it has a substantial customer base of over one million Internet services subscribers under its ISP licence.

Additionally, the company has a subscriber base of over 3 million in rural areas under the USO Scheme of the government whose revenues have certain exemption under the policy guidelines.

Source: http://www.thehindubusinessline.com