5 mobile firms to pay penalty of Rs. 1,594 crore to DoT

Five mobile phone firms operational in the country will be formally penalized, this week by the Department of Telecommunications (DoT) for having allegedly understated their revenues and paid less levies, according to a report by The Economic Times. The five companies, namely Bharti Airtel, Idea Cellular, Vodafone, Tata Teleservices, Tata Communications and Reliance Communications will have to face a penalty, collectively of Rs. 1,594 crore, according to this report. Quoting a statement from an official in the department, the report adds, "The DoT plans to send demand notices to Bharti Airtel, Idea Cellular, Vodafone, Tata Teleservices, Tata Communications and Reliance Communications by the month-end. The responses by all companies to the showcause notices have been dismissed." Early this year these companies were sent showcause notices, when a DoT appointed panel, furthering the findings of external auditors, found that the companies had understated revenues by Rs. 10,268 crore during during 2006-07 and 2007-08 periods.

Have to pay penalty along with others! (Image credit: Getty Images)

The report adds that according to the DoT's estimates - Bharti Airtel has to pay a penalty of Rs. 292 crore, while for Vodafone it's Rs. 254 crore. Idea will have to pay a penalty amounting to Rs. 113 crore, Tata Teleservices has to pay a penalty of Rs. 273 core and Tata Communications has to pay a penalty of Rs. 120 crore. Reliance Communications will have to pay about Rs. 551 crore as penalty. The penalties include interest.

The report also revealed that telcos pay 6-10 percent of their annual revenue as licence fee and 2-6 percent as spectrum usage charges. So essentially when they declare lower revenue, it also brings down "the component they have to share with the government." The telcos, however went ahead and denied having done anything wrong and also rubbished the findings of the DoT panel. The report added further that, "Executives with these companies declined to comment and said they were unaware of the government's decision to issue demand notices. Executives with two companies pointed out they had issued statements earlier stating that the special audits had established that their books were in order."

Reportedly, in 2009 a government-ordered external audit on the books of all major mobile phone firms had taken place. It was done to ensure that that "they had correctly reported and shared revenues with it. Jaipur-based Parakh & Co audited RCOM's books and was the first to submit its report. Contractor, Nayak & Kishnadwala were the auditors for Bharti Airtel, Chhajed & Doshi for Idea Cellular and SK Mehta and Company looked at the books of Vodafone." Reliance Communications, according to this report had asked the department to reject the special audit by Parakh & Co. The company alleged that "the report 'was issued for malafide purpose, based on uncorroborated facts and done without any discussions with it (RCOM)'. The telco had also told the DoT that 'the entire report was drafted for the purpose of sensationalising irrelevant matters'."

The telecom department has been imposing some stringent rules over the past year, starting with banning unsolicited SMS and calls, to imposing transparency of tariff cards and terming 3G roaming illegal. It had even miffed telcos over charging a one-time fee for spectrum that exceeds the 6.2 MHz contract. Later it was reported to impose a one-time fee on prospective basis.