A new report released by the international anti-corruption organisation, Transparency International has  raised questions about major telecommunication companies, including Vodafone and Airtel for several levels of inadequate transparency on how they organise themselves and on their operations in different countries.

This is  according to a new report from Transparency International and its national chapter in Hungary.

To be fair though, Vodafone and Airtel performed quiet well in the ratings, though there is room for improvement on some of the parameters, according to the report.

In the first-ever assessment of the major telecoms companies’ transparency in corporate reporting, 27 out of the 35 largest firms measured do not disclose where their subsidiaries operate and only four companies reveal information on their tax payments in each of the countries in which they are active.

Whiles the telecommunication companies did relatively well in terms of anti-corruption programmes,  a large amount of corporate holdings remain unreported, casting shadows of secrecy on their corporate structures.

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The report which analysed the 35 largest telecommunication companies in the world,ranked them based on the extent to which they report on laid down strategies to fight  corruption, their information about subsidiaries and holdings, and key financial information including payments abroad.

Telecos operating in Ghana

Meanwhile, Vodafone scored quiet high, placing third out of the 35 telecommunication companies on the parameters of anti-corruption programs, Original Transparency and Country-by- Country reporting. Vodafone scored an aggregated score of 6.4 out of 10, placing after Telenor and Deutche Telekom who scored 7.4 and 8.8 resectively.

Under Anti-corruption programs, Vodafone scored 88%, 50% under Original Transparency and 54% under Country-by-Country reporting.

In the case of Airtel, however, the company missed the borderline average of 4.1 by 0.1. Bharti Airtel, parent company of Airtel Ghana scored 4.2 in aggregate score, placing above the companies BCE, Nokia, and Telecom Italia, who scored, 4.0 each.

In terms of specific percentages, Airtel scored 73% in Anti-Corruption Program, 50% in Original Transparency and 3% under Country-by-Country reporting.

“Mobile phones, the Internet and widespread access to cellular networks have proven vital to economic growth, the spread of democracy and even reducing inequality. Telecommunications companies have an important obligation to do everything possible to keep their businesses as clean as possible and stop corruption in their companies,” said Transparency International Business Advisory Board Chair Jermyn Brooks.

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Best Performers

According to these criteria European companies are the best performers, Asian companies the worst. Three companies (Deutsche Telekom, Vodafone and Telenor) scored over 50 per cent in all three dimensions.

Developments such as liberalization of rules and regulations has increased exposure to corruption, along with the temptation of big profits and the opportunities for corruption that came with large licensing fees, major equipment contracts, the sale of state operators and an increase in mergers and acquisitions.

Some leading telecommunications companies, such as Vimpelcom, Alcatel-Lucent, TeliaSonera and China Mobile, have been subject to extensive corruption investigations in recent years.

"To ensure compliance with laws and to manage the broader risks of corruption and poor performance against ethical standards, telecommunications companies must adopt strong and clear policies and management systems to curb bribery and corruption.” said József Péter Martin, Executive Director of Transparency International Hungary.

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Analysis of Transparency Behavior of Telecos

While there are anti-corruption programmes in place at most of the assessed companies, only 15 out of the 35 companies have a mechanism for regular monitoring of this programme. An anti-corruption programme can only be applied effectively in practice if it is adequately and regularly checked.

At management level, senior members of the management or board in the majority of the companies (83 per cent) demonstrate support for anti-corruption measures. However, only half of the assessed companies make it clear that the anti-corruption policy or the code of ethics applies to their directors as well.

The expansion of the industry also brings considerable risks of corruption as mobile services are increasingly provided where the rule of law is weak.

25 companies scored less than 30 per cent in reporting financial data in each country of operation, with AT&T scoring the lowest, with a score of just 1 per cent. Financial accounts for each country of operation should be published to mitigate political and reputational risks, provide information to local stakeholders and enhance investment certainty by disclosing special tax arrangements and potential for regulatory capture.

A number of telecoms companies have started to report their income and taxes on a country-by-country basis; however, community contributions, the amount of investments made and the profit generated before tax are seldom reported country-by-country. Country-by-country reporting is likely to become mandatory in the European Union in the near future.

The average overall score of 4.1 out of 10 in this report makes one thing very clear: Far more work is needed to make telecoms companies less susceptible to corruption.