Consumer body demands forensic audit into GTT

Dec 14, 2016 News

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– says telephone company hid true profits, assets

– landline expansion abandoned in favour of mobile services

There is a major battle brewing between US-owned Guyana Telephone and Telegraph Company (GTT) and the Guyana Consumers Association (GCA).

Following an application -”Grounds for a review of Order No1/2015″- made on November 17th by GTT to the regulator – the Public Utilities Commission (PUC), the association has released its submissions which accuses the telephone company of deliberately hiding its profits and refusing to expand its landline service in order to capitalise and focus on the lucrative mobile services market.
The consumer body now wants Government to order a forensic audit into the operations of GTT to determine how much profits exactly it has been making.
The concerns of GCA were raised in the memorandum dated December 9th and which was sent to the PUC.
The memo was sent by GCA’s Secretary, J. Deonauth to PUC’s Chairman, Justice (Ret’d) Prem Persaud.
According to the association, if GTT had “truthfully” wished to reduce international rates, it would have modernized its technology and would have done what efficient telephone companies worldwide have done when encountering competition from similar international rate reduction – it would have reduced its international rates.
“But GTT has no intention of reducing international rates. They are intent that the consumer must subsidise them both directly or indirectly, an attitude deriving from being a monopoly.”
According to GCA in its memo, it has reservations also about the integrity of the Commission to evenhandedly dispense justice to the consumers and “the Commission needs to publicly address this issue”.
GCA said that the regulator should dismiss the telephone’s company claim for special profits for its landline services.

SUPER PROFITS
“Our reason for this position is that by their Contract with the Government of Guyana, profits of the company are calculated on the basis of assets only. They could make a minimum profit of 15% of assets plus “Advisory Fee” of 6% of gross takings making a total profit of nearly 30%. No profits are calculated on segments. To attempt to calculate profits on segments, is a surreptitious attempt by GTT to vary their Contract.”

GCA also accused GTT of deliberately practicing questionable accounting by making Guyanese consumers pay 15% return on its depreciated landline assets “allowing the company to harvest in super profits on the landline. These super profits are not credited to the landline”.
As a matter of fact, GCA told PUC, the fibre optic and the copper lines belonging to the landline have been used and are being used to transmit mobile and internet traffic, which in 2015 was estimated to be earning US$2 million per annum. “These revenues, which are concealed profits, must be credited to the landline,” the memo urged.
GCA said the best way of “knowing the truth and giving the PUC evidence on which it could act” is to have the company disaggregate and segmentalise its accounts as other big companies in Guyana do.
“The PUC cannot act on GTT’s demands except the accounts are disaggregated and segmented so as to give the PUC a rational base on which to make their deliberations. Ultimately the PUC should consider employing their own independent consultants that can assess GTT’s numbers and to see whether they can arrive at the same conclusions as Analysys Mason.”

FORENSIC AUDIT
GCA stressed that if GTT does not disaggregate and segment its accounts, then a forensic audit must be carried out.
“The Government of Guyana has now made the execution of Forensic Audits a policy for entities whose accounts and activities are not transparent or are questionable or inexplicable or opaque. We would ask the PUC to quickly commission a Forensic Audit of GTT’s accounts so as to break the deadlocks which have arisen between the PUC and GTT over the years.”
GCA pointed to the “illegal transference of assets”, such as the undersea cable, to offshore entities and noted that the collective understanding of the company’s operations could only be achieved by a forensic audit.
GCA said that the telephone company’s recent demand for increased rates is spurious.
“For 26 years the Guyanese consumers have funded all investments by GTT within and outside of Guyana. This funding is the formidable basis of a company that uses internal interest-free funds to expand and then claim increased rates from double dipping,” the memo to PUC said.
GCA said that while the regulator has never approved rates increases for the company, the fact that it has been gaining 10,000 customers per year ought to have provided increased revenues with straight-line cost.
The association also argued that GTT benefited from a decline in real labour costs over the past 20 years.
“When ATN/GTT took over the GTC, the company had approximately 1200 employees. GTT quickly reduced the number by 600 or 50%. And secondly, the company continues to add non-regulated services such as the cellular telephones and DSL to which it diverts human resources. This means the GTT worker at basically the same wage has to do three or four more times work. Other landline resources such as stationery, billing and transport are also diverted. Since there is no proper disaggregation of their cost, these numbers will remain unclear.”
On top of this, GCA said that the telephone company is making handsome profits of 15% of assets, plus advisory fees, over the 15 years, plus the massive profits from the unregulated services like the cellular data and DSL, and simply could not have filed for increased rates for landline – it was no act of mercy or compassion for the consumers.
“When you are making more than adequate profits, you simply can’t ask for more,” GCA pointed out.
Government has passed new laws to break GTT’s monopoly on landline and international calls.
Negotiations started last week with the principals of the US-owned company with its officials here.

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