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RCOM caused Rs 250 cr loss: Raja
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Anil Ambani-controlled Reliance Communications (RCOM) found itself defending charges of financial wrongdoing on Monday, after the government said it had caused losses of around Rs 250 crore to the exchequer by under-reporting revenues.

Telecom minister A Raja told Parliament that RCOM, India’s second-largest mobile operator, had under-reported revenues by up to Rs 1,500 crore to sector regulator Trai for the years 2006-07 and 2007-08, and the department of telecom (DoT) was examining the issue.

“There was an under-reporting of Rs 1,000 crore to Rs 1,500 crore by RCOM to avoid payment of licence fees and the government may have lost about Rs 250 crore due to this,” Mr Raja told the Lok Sabha during question hour. The minister's statement was based on a recent report by a special auditor appointed by the communications ministry.
RCOM, whose scrip fell 1.7% to Rs 175.90 on Monday, vehemently denied the allegations.

“RCOM strongly affirms that it anticipates no additional financial liability towards licence or spectrum fee. The special auditor’s report...is incorrect, hopelessly biased, one-sided and prejudiced,” it said in a statement.

In October this year, Jaipur-based Parakh & Co, the auditor appointed by the telecom ministry to examine the books of the company and its subsidiaries, said in a report that the firm 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. These fees are charged as a percentage of a company’s revenue.

The auditor also accused the company of stating a different set of numbers to shareholders, it said RCOM had inflated wireless revenue by 23%, or Rs 2,915 crore, to Rs 15,213 crore in 2007-08.

The DoT had appointed the special auditor after the Cellular Operators Association of India, a grouping of GSM mobile operators, had alleged the 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. A committee headed by a senior DoT official is looking into the nearly 900-page report submitted by Parakh & Co, and will take a call on whether the special audit should extend to the financials of 2008-09.

RCOM said its “accounts have been prepared in accordance with generally accepted Indian accounting standards and principles, the applicable provisions of the telecom licence, and general industry practice”. “The accounts have been subjected to the peer group review by auditors appointed by Sebi as recently as in May 2009,” it added.

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