PracticeConsultingAuditors worried over 3G mobile costs

Auditors worried over 3G mobile costs

Some telecom companies could face financial crisis over their bids for third generation mobile licences which experts warn may lead to qualified audit reports.

Audit experts on the sector have warned that companies could have their audits qualified as concerns grow over the amount of cash paid for the licences.

The news comes as banks come under increasing pressure to reduce their exposure to the telecoms sector.

Sean Collins, head of the information, communications and entertainment practice at KPMG, said that ‘going concern’ issues should be a serious matter for the companies and their advisers.

He said: ‘The normal rules apply. If you can’t see a way to pay the bills 12 months ahead, then this is a serious issue for the board and their auditors.’

The problems stem from government auctions which forced companies into bidding higher than expected for the third generation mobile licences.

In the UK alone the licence auction boosted the Treasury’s coffers by some £22bn.

To fund the bids companies have borrowed extensively in anticipation of boosted revenues from the new technology.

In the UK, both the Financial Services Authority and the Bank of England have publicly warned banks to monitor their lending to the telecoms sector and to ensure they were not running excessive risks.

‘The bidding wars have put a big strain on the telecom companies’ business models and this has had a subsequent effect on the balance sheets,’ warned Collins. ‘There won’t be a rash of qualified audits immediately, but going forward some of the new entrants, with no established revenue stream, could face difficulties.’

Another Big Five accountant said that auditors were very worried over the prospect of qualifying telecom accountants over going concern.

WHO PAID WHAT FOR THE UK LICENCES?

Licence A TIW UMTS (UK): £4.4bn Licence B Vodafone: £6.0bn Licence C BT(3G): £4.0bn Licence D One2One Personal Communications: £4.0bn Licence E Orange 3G: £4.1bn Source: DTI

Related Articles

5 tips for SMEs to protect cash flow

Accounting Software 5 tips for SMEs to protect cash flow

5m Alia Shoaib, Reporter
Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

Consulting Tyrie on Finance Bill 2017: ‘Making Tax Policy Better’

11m Stephanie Wix, Writer
Managing partner Q&A - the year ahead: Richard Toone, CVR Global

Accounting Firms Managing partner Q&A - the year ahead: Richard Toone, CVR Global

12m Kevin Reed, Writer
Deloitte 'self-imposes exile' on government contracts to defuse PM row

Accounting Firms Deloitte 'self-imposes exile' on government contracts to defuse PM row

12m Kevin Reed, Writer
Managing partner Q&A - the year ahead: Julie Adams, Menzies

Accounting Firms Managing partner Q&A - the year ahead: Julie Adams, Menzies

12m Kevin Reed, Writer
Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

Business Regulation Friday Afternoon Live: Deloitte's tech thing; PAC wants HMRC 'contingencies'; and Sports Direct

1y Kevin Reed, Writer
Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

Audit Friday Afternoon Live: HMRC complaints rise; Deloitte scoops big audits; and corporate reporting woes

1y Kevin Reed, Writer
New head of equity capital markets for KPMG

Accounting Firms New head of equity capital markets for KPMG

1y Stephanie Wix, Writer