Grameen Phone vs. BTRC: Let’s make sure it’s not another witch hunt

Bangladesh Telecommunication Regulatory Commission (BTRC) and Grameen Phone's owner Telenor are currently engaged in a hostile legal wrangling over BTRC's demand for Tk 30 billion ($400 USD) in unpaid taxes and fees from GP. Given that the accusation against Grameen Phone is quite grand, we hope the Bangladesh regulators right about their demand. Otherwise, there is a potential for a huge embarrassment for the government and the nation.

Grand claims or accusations often create problems for not only the accused, but also for the accuser. The problem for the accused, in this case Grameen Phone, is obvious. Being the largest Bangladeshi cellular network, it must have some reputations to keep. It is owned 54 percent by Telenor, a Norwegian telephone company. This foreign entity must also have to care for its international reputations, particularly if they have plans to expand into other emerging markets like Bangladesh. Being accused at such grand levels in Bangladesh will certainly hurt Telenor's global ambitions. The company, as it is already evident, will vehemently try to prove its innocence.

The problem for the accuser, in this case the BTRC, is that it must now answer what it was doing when Grameen Phone was avoiding payment of such a large sum of money. Such an amount did not accumulate overnight. It took months and years. BTRC needs to explain, which of its checks and balances failed that allowed the unpaid fees/taxes to get this big.

We need to understand that the burden of proof is always on the accuser. Unfortunately, Bangladeshi authorities in general do not have a solid track record in that regard. They have a tendency to inflate their accusations whenever they choose to accuse someone. I am sure the readers remember those billion taka accusations against this-and-that senior political leaders or businessmen. Many of these accusations remain unproven and unpunished. This is not because those accusations were entirely false, but because the allegations were so much inflated that proving them became unnecessarily difficult.

Then there are the recent run-ins between the incumbent Bangladesh government and Grameen Bank's founder Muhammad Yunus. Grameen Phone is owned 34 per cent by Grameen Telecom, a subsidiary of Grameen Bank. It is fair to assume that Grameen Bank or Dr. Muhammad Yunus were not materially involved with Grameen Phone's operations. Still there is this perception held by critics of the current government that they are influencing BTRC (an otherwise independent body) to bring financial allegations against Grameen Phone just to teach Muhammad Yunus another lesson.

Sometimes perception is more powerful than reality, and this may be a concern in this case.

Now the question is what should BTRC do at this point? Given that they have already gone public with their pursuit of Grameen Phone, BTRC should try to undeniably prove their accusations. So far Grameen Phone's rebuttals against BTRC's claims implied two major concerns. One, the procedures for BTRC's audit of the telecom company was not of international standard. Two, the auditors were not from an international audit firm. BTRC has to eliminate these two implied concerns of Grameen Phone and international observers.

To strike a nationalist angle, it can be pointed out that when a company starts doing business in any foreign country, rarely are there requirements that the regulatory audits must be conducted by international auditors. For countries like Bangladesh, hiring international auditors for internal regulatory audit sounds ridiculous given the costs associated with it. We can bet Telenor would not have asked for international audit, had they been accused of tax evasion in the UK or the US. They would quietly comply with local audit.

But Bangladesh is no US or UK, and justifiably so, given the track record of our authorities making unprovable grand claims. Therefore, at this point the easiest solution for BTRC should be to appoint an international auditor like KPMG, Ernst & Young, or Price Waterhouse Cooper (PWC).

Given the large sum of unpaid tax/fees that the BTRC can potentially recover from Grameen Phone, the cost of such audit should blur in comparison to its benefits. The cost for such an audit would at most be a few million US dollars vs. BTRC's claim of about $400 million US dollars.

If international auditors conclude that Grameen Phone owes Bangladesh the unpaid balance, the Bangladesh government and BTRC should help Grameen Phone pay the sum in instalments, rather than trying to extract the money in one shot and in the process ruining its operations. The Bangladeshi authorities should remember that besides creating millions of jobs, there are thousands of crores of taka that Grameen Phone did pay to Bangladesh in taxes. The company deserves some respect for that.

On the other hand, if the international auditors find that the claims of BTRC against Grameen Phone are no better than those billion taka claims against various local politicians, the government/BTRC should start doing some house cleaning. That should include firing of senior regulatory officials, auditors, and some more.

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Shafquat Rabbee is a freelance contributor from New York, USA.