TMI BlogROLE OF COST ACCOUNTANTS IN TELECOMMUNICATION INDUSTRY.X X X X Extracts X X X X X X X X Extracts X X X X ..... ROLE OF COST ACCOUNTANTS IN TELECOMMUNICATION INDUSTRY. - By: - Mr. M. GOVINDARAJAN - Other Topics - Dated:- 7-2-2012 - - INTRODUCTION: The Telecom Industry is having its own 160 years history in India. The industry till the introduction of liberalization and globalization policy of the Government it was monopoly in the hands of the Central Government. The revolution began when it was felt that the development of telecommunications was a crucial factor in achieving socio-economic development of the country. The Government announced its First National Telecom Policy during the year 1994 with a major thrust on universal service and qualitative improvement in telecom services and also opening of private sector participation in basic telephone services. The New Telecom Policy 1999 permitted the private operators in more segments. The Telecom Regulatory Authority of India was constituted to regulate telecom services. Foreign Direct Investments are allowed up to 74% in Telecom Industry. Due to competition the tariff has been much reduced the telecommunications services have been used by all sort of people in the country. Communication is very ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... much easier now for all people. Still there is potential in the telecom industry in which opportunities and threats are there. According to a Frost Sullivan industry analyst, by 2012, fixed line revenues are expected to touch US$ 12.2 billion while mobile revenues will reach US$ 39.8 billion in India. Professional skills in Engineering and Accounts are highly required for this industry. A Cost Accountant, being expert in the Accounting and costing the role of a Cost Accountant is very much importance and inevitable for the telecommunication industry. TRAI: One of the main objectives of TRAI is to provide a fair and transparent policy environment which promotes a level playing field and facilitates fair competition. In pursuance of above objective TRAI has issued from time to time a large number of regulations, orders and directives to deal with issues coming before it and provided the required direction to the evolution of Indian telecom market from a Government owned monopoly to a multi operator multi service open competitive market. The directions, orders and regulations issued cover a wide range of subjects including tariff, interconnection and quality of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as well as governance of the Authority. The following are the recommendatory functions of TRAI: Need and timing for introduction of new service provider; Terms and conditions of licence to a service provider; Revocation of license for non-compliance of terms and conditions of license; Measures to facilitate competition and promote efficiency in the operation to facilitate growth in industry; Technological improvement in services by service providers; Inspection of type of equipment used by service provider; Measures for Technological development; Efficient Management of available spectrum. The following are the mandatory functions of TRAI: Fix the terms and conditions of their inter connectivity between service providers; Ensure Technical compatibility and effective inter-connection between different service providers; Regulate arrangements for sharing of revenues amongst service providers; Lay-down the standards of quality of services to be provided by service provider, ensure this by periodical survey; Lay-down and ensure time period for providing local and long-distance circuits of telecommunication between different service provi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ders; Maintain inter-connect agreement register; Ensure compliance of USO(universal service obligation). TELECOM INDUSTRY: The Telecom industry can be divided into four segments- Network infrastructure companies; Telecom Service providers; Telecom Equipment Manufacturers; Telecom Solution Providers. The Major players can be segmented into the below three categories: State owned companies - BSNL and MTNL; Private Indian owned companies - Reliance, Tata Teleservices; Foreign invested companies - Vodafone-Essar, Bharti Tele-Ventures, Idea Cellular, Loop Mobile, Spice Communications. The following tables and information will give the present scenario of Telecom Industry. Table - 1 The total number of connections as on 31.07.2011 Particulars Wireless Wireline Total Total Subscribers (in Million) 858.37 34.18 892.55 Urban subscribers (in million) 565.71 25.77 591.49 Rural Subscribers (in Million) 292.65 8.41 301.06 Urban Teledensity 156.69 7.14 163.83 Rural Tel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edensity 34.92 1.00 35.93 Share of urban subscribers 65.91% 75.40% 66.27% Share of rural subscribers 34.09% 24.60% 33.73% (Source: www.trai.gov.in) Table - 2 Service provider wise market share for wireless as on 31.07.2011 Name of Service provider Market share Bharti 19.89% Reliance 16.87% Vodafone 16.66% Idea 11.20% BSNL 11.08% Tata 10.29% Aircel 6.83% Uninor 3.19% Sistema 1.43% Videocon 0.82% MTNL 0.64% Stel 0.41% Loop 0.37% Etisalat 0.17% HFCL 0.16% Private participation is 88.27% and PSUs participation is 11.73% (Source: www.trai.gov.in) Table- 3 Service provider wise market share for wire line as on 31.07.2011 Name of service provider Market share BSNL 71.93% MTNL 10.08% Bharti 9.73% Tata 3.91% Reliance 3.66% HFC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L 0.57% Sistema 0.12% Private participation is 18% and PSUs participation is 82% (Source: www.trai.gov.in) Internet subscribers as on 31.03.2011 19.67 million Broadband subscribers as on 31.07.2011 12.50 million ROLE OF COST ACCOUNTANT: Cost Audit: Sec.209 of the Companies Act, 1956 deals with the books of account to be kept by the Company. Sec. 209(1)(d) provides that every company shall keep at its registered office proper books of accounts in the case of a company pertaining to any class of companies engaged in production, processing, manufacturing or mining activities, such particulars relating to utilization of material or labor or to other items of cost as may be prescribed, if such class of companies is required by the Central Government to include such particulars in that books of account. Sec.233B of the Act deals with the audit of cost accounts in certain cases. This section provides where in the opinion of the Central Government it is necessary so to do in relation to any company required under Sec.209 (1) (d) to include in its books of account the particulars referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to therein, the Central Government may, by order, direct that an audit of the accounts of the company shall be conducted in such manner as may be specified in the order by an auditor who shall be a cost accountant within the meaning of the Cost and Works Accountants Act, 1959 The Cost Audit Branch, Ministry of Corporate Affairs, New Delhi issued an order vide No. F.No.52/26/CAB-2010, dated 02.05.2011 by virtue of powers conferred on it by Section 233B (1) of the Act. In that order it directed that all companies to which Cost Accounting Records (Telecommunications) Rules, 2002 and wherein- the aggregate value of net worth as on the last date of the immediately preceding financial year exceeds five crores of rupees; or wherein the aggregate value of the turnover made by the company from sale or supply of all products or activities during the immediately preceding financial year exceeds twenty crores of rupees; or wherein the company s equity or debt securities are listed or are in the process of listing of any stock exchange, whether in India or outside India shall get its cost accounting records, in respect of each of its financial year commencing on or after th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e accountings holding valid certificate of practice under the provisions of Cost and Works Accountants Act, 1959. Therefore, the Practising Cost Accountants are to be appointed as Cost Auditors in such companies to cause audit. Appearance before Quasi Judicial Forum: Telecom Disputes Settlement Appellate Tribunal was established to resolve the disputes between the service providers, Government authorities and service providers and consumers. A practising Cost Accountant is authorized to appear this Tribunal to resolve the disputes of the service providers. Likewise in tax matters especially in service tax matters the practising Cost Accountant is having wide scope of practice in appearing before Adjudicating authority, Commissioner of Central Excise (Appeals) and CESTAT. Advisor: A Practising Cost Accountant may render advisory services to the companies in telecom industry in taking policy decision, cost reduction, maintaining the quality, introducing innovative schemes etc., by virtue of his expertise in costing and accounting. Mana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gement participation: Besides practising a cost accountant has abundant opportunities in getting employment in telecom industry which is remunerative and challenging for his profession. ANALYSIS: Each of the industry has its own strength, weakness, opportunities and threats. Telecom industry is not an exemption to this. The number of subscribers in this industry is tremendous. India is second place in the world next to China having maximum subscribers. Still India is considered as having much potential area in this sector. Despite the increase in the number of subscribers the revenue is not to the proportionate. The gross revenue as on 31.03.2010 is Rs.40,265.12 crores and the gross revenue as on 31.03.2011 is Rs.45,513.05 crores. But the Average Revenue per user is declining as shown in the following table: Table - 4 Average Revenue per user Period Ending GSM CDMA 31.03.2010 Rs.131 Rs.76 31.03.2011 Rs.100 Rs.66 (Source: www.trai.gov.in) The reason for this due to the declining in tariff, payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spectrum fee, payment of licence fee, huge cost for advance technology like Multi Number portability etc., The adoption of new technology has been a major factor that has helped service providers reduces the tariffs considerably. The Telecom industry is to render services within the lowest tariff. Therefore it is pertinent to concentrate to reduce the cost without affecting the quality. One example for reduction of cost, the reduction the network deployment costs. By this the service providers will have the following advantages- Improved service quality; Increased affordability for customers; Faster roll out of services in rural and remote areas; Significant reduction in initial set up costs; Lower operating costs; Increased environment aspects. We have to see the positive aspects. Universal Obligation fund helps the service providers to compensate for their host cost investment. Foreign Direct Investment is allowed up to 74%. Technology development is also brightening the telecommunication industry. New Telecom Policy 2011: The Central Government formulated New Telecom Policy 2011 for the telecom industry. It is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... initiative to create a policy framework to address the sustained adoption of technology in education, health, employment generation, financial inclusion etc., It endeavors to create an investor friendly environment for attracting additional investments. The vision of the policy is to provide to the people of India, secure, reliable, affordable and high quality converged telecommunication services anytime, anywhere. Some of the following featured objects of the policy are as follows: To provide high quality, affordable and secure telecommunication services to all citizens; To increase rural density from the current level of 35 to 60 by the year 2017 and 100 by the year 2020; To provide affordable and reliable broadband on demand by the year 2015 and to achieve 175 million broadband connections by the year 2017 and 600 million by the year 2020 at minimum 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand; To provide high speed and high quality broadband access to all village panchayats through optical fiber by the year 2014 and progressively to all villages and habitations; To create corpus to promote indige ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nous R D, IPR creation, entrepreneurship, manufacturing, commercializing and deployment of the state of the art telecom products and services during the 12 th five year plan period; To promote the domestic production of telecommunication equipment to meet 80% Indian Telecom sector demand through domestic manufacturing with a value addition of 65% by the year 2020; To achieve one Nation Full Number Mobile Portability and work towards one nation free roaming ; To facilitate consolidation in the converged telecom service sector while ensuring sufficient competition; To protect consumer interest by promoting informed consent, transparency and accountability in quality of service, usage, tariff etc., To strengthen the grievance settlement mechanisms to provide timely and effective resolution; To evolve a framework for financing the sector and streamlining taxes and levies for long term sustainability of telecom sector; To achieve a substantial transition to new internet protocol (IPv6) in the country in a phased and time bound manner by 2020 and encourage and eco system for provision of a significantly large bouquet of services on IP platform; To strengthen th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e institutional, legal and regulatory framework and re-engineer processes to bring in more efficiency, timely decision making and transparency. The Government formulates various strategies to achieve the objectives enshrined in the New Telecom Policy 2011. CONCLUSION: The discussions made in this article on the role of Cost Accountants in the Telecom industry are not exhaustive. It is a wider area. There are many areas in which professionals like Cost Accountant has to exert their expertise. The National Telecom Policy 2011 will develop the Telecom Industry at par with international quality and also the largest industry in the world. The Cost Accountants are to use this opportunity to show their excellence in their profession and to lead the development of telecom service that should reach every citizen in any place, any where. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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