DoT to carry out special audit of telcos

25 Sep 2018

India’s Department of Telecommunications (DoT) is planning a special audit of mobile operators to investigate whether providers have been under-reporting revenue, the Economic Times writes. The audit will span the period from the 2011/12 fiscal year onwards and is looking to account for the downturn in licence and spectrum fees in recent years. Calculations for both charges are based on the licence holder’s turnover, and government returns from the fees fell by more than 23% in 2017 as a result of severe price competition affecting operator’s revenues. The paper quotes an unnamed DoT official as saying that ‘all telecom companies will be audited … and notices will go out soon,’ whilst confirming that Aircel, which is currently in the midst of bankruptcy proceedings, has already received its notice.

Operators have expressed concern that the audits will add more pressure to the already-stressed sector. Alongside any additional demands, operators are increasingly concerned with the burden of legal challenges to the DoT’s demands. Rajan Matthews, the head of industry body the Cellular Operators Association of India (COAI) was quoted as saying: ‘Special audits typically happen when the DoT is not convinced about account reporting and the concern is mainly on the AGR [adjusted gross revenue] calculations that are defined differently. They have every right to audit, but if operators again decide to challenge the new findings, it will lead to more legal cases.’ Similarly, a senior executive from one telco added: ‘This will be another way for the telecom department to see if they can charge us any other kind of dues. And this is contradictory to DoT’s stated claim that it wants to reduce litigation.’ Operators claim that the industry has racked up legal fees of nearly INR800 billion (USD11 billion) in the last few years, solely through clashes with the regulator and the government.

The audit will be the third such audit carried out by the DoT, following investigations in 2009 and 2016, both of which led to demand notices that were subsequently challenged in the courts. The most recent called for six telcos to hand over a combined total of more than INR120 billion and is still stuck in the courts. A major sticking point in resolving the cases has been the definition of AGR, a matter that is itself the subject of a decade-long legal feud between the government and the industry.