No liability whatsoever on Bharti Airtel: Manoj Kohli

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No liability whatsoever on Bharti Airtel: Manoj Kohli

In an interview with CNBC-TV18, Manoj Kohli, CEO, Bharti Airtel gave details of the period for which the independent special audit was carried out.

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Excerpts from What's Hot on CNBC-TV18 Watch the full show » ALSO READ See latest News about Bharti Airtel See previous management interviews See what other Experts & Brokerages are saying about Bharti Airtel Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Reliance Communications |

In the Department of Telecom (DoT) ordered special audit on Bharti Airtel , auditors - Contractor, Nayak & Kishnadwala, in a 306 page report have quantified the licence fee impact on distributor margins. The total impact for FY07 and FY08 has been estimated at Rs 98 crore. The audit report comes after almost nine months. It is the second independent audit of an Indian telecommunications company, the first being Reliance Communications . The report was made available to the DoT and the company last week.

In an interview with CNBC-TV18, Manoj Kohli, CEO, Bharti Airtel gave details of the period for which the independent special audit was carried out.

Q: One of the findings seems to suggest that the licence fee impact on distributor margin for FY07 and FY08 is over Rs 200 crore. Is that correct? And can the findings now imply that the dot can seek additional license fee or spectrum dues from Bharti? What happens from here on? Since this is an extensive report, are any other liabilities or material impact likely in the fine print that investors should be aware of?

A: Let me say that Bharti Airtel has always maintained the highest standard of corporate governance and has displayed highest regards for regulatory compliance. On the specific issue of distributor margins, based on the specific request of the DoT, the auditors have done their own estimates of a likely license impact on the distributor margin. Their estimates are Rs 35 crore in 2006-07 and Rs 62 crore in 2007-08 totaling to Rs 98 crore.

This is an industry issue applicable to all the operators. There is no liability whatsoever on this account that the company has paid its licence fee on actual realized revenues. The honourable TDSAT ruling of August 30, 2007 also made it clear that licence fee is payable only on actual revenues and not on notional revenues. The TDSAT ruling is binding up on DoT as per the Supreme Court directive on January 11, 2010.

Further I just want to add here that the company's view is supported by very strong legal opinion from former chief justice of supreme court, the former solicitor general of India, former advocate general of India that there is no right of DoT to levy any licence fee on notional revenue.

So the auditors have only done an estimation as per the advice of DoT who instructed them to do this irrespective of the legal position. So we are very clear, there is no need for any investor or anyone to worry. This is a very clear case of a notional revenue and a notional estimation and no further license fee has to be paid.