Reliance Communications (RCOM), India’s second-largest telecom company by subscribers, has asked the communications ministry to reject the special audit on it by Parakh & Co and alleged that the report `was issued for malafide purpose, based on uncorroborated facts and done without any discussions with it (RCOM)’. The telco has also told the Department of Telecom (DoT) that `the entire report was drafted for the purpose on sensationalising irrelevant matters’.
In October 2009, Jaipur-based Parakh, the auditor appointed by the telecom ministry to examine the books of RCOM, said in a report that the telco had failed to show revenues of Rs 2,799.19 crore, causing losses of Rs 315 crore to the government in terms of licence and spectrum fees.
Last month, based on the special auditor’s report, communications minister A Raja had informed Parliament that RCOM had caused losses of around Rs 250 crore to the exchequer by under-reporting revenues.
In a 28-page communication to DoT dated January 13, a copy of which was viewed by ET, the telco had sought that stringent action be taken against the auditors for `misconduct in the preparation of the report and their failure to observe their undertaking of confidentiality’ . The telco has also alleged that the special auditors had leaked the report to the media.
When contacted, the RCOM spokesperson confirmed having written to DoT on the special auditor having `made selective leakages of the audit report to the media even before DoT opened the confidential envelope containing the report’ and said this `clearly reflects prejudiced, mischievous, biased and malafide intention and above all acting on behalf of our corporate rivals’.
The spokesperson also reiterated RCOM’s stance on the auditors’ along the same lines as reflected in the company’s response to DoT. Further, the email reply from the company said there was `no irregularity or discrepancy whatsoever in the accounts of the company’.
DoT had appointed the special auditor after the Cellular Operators’ Association of India had alleged under reporting of revenues by RCOM. The audit was later extended to RCOM’s rivals, including Bharti Airtel, Vodafone Essar, Idea Cellular and Tata Teleservices. These audits are currently underway.
The Mumbai-headquartere d telco, in its reply has also said that it has furnished proof to show that the special audit has erroneous facts, erroneous conclusions on matters of law, one-sided computations and had incorporated irrelevant and unnecessary data resulting in disclosure of unnecessary details that caused damage and harm to RCOM.
RCOM has also given a point-by-point rebuttal to each of the issues raised by Parakh.
RCom wants action against its special auditor
Reliance Communications (RCom) has asked the department of telecommunications (DoT) to take action against its special auditor, Parakh & Co, for alleged breach of confidentiality and misconduct. It has also asked DoT to scrap Parakh’s report, saying the conclusions are incorrect, unilateral and biased.
The audit report, commissioned by the DoT, had alleged that RCom had hidden revenues of Rs 2,799 crore for the financial years 2006-07 and 2007-08, costing the government Rs 315 crore in licence and spectrum fees that are charged as a percentage of revenue.
The auditor also said RCom inflated wireless revenue by 23 per cent or Rs 2,915 crore, to Rs 15,213 crore in the report to shareholders in 2007-08.
The terms of reference did not require the auditor to make observations on consolidated financial statements. Moreover, they have finalised the report without any discussion or communication with us, the company said.
