Mobile operator O2, which is now jointly owned by Telefónica and Liberty Global, is being investigated by the UK’s Serious Fraud Office, a government department that prosecutes cases involving complex frauds and corruption, reports The Telegraph. The information was disclosed via a footnote to the company’s quarterly accounts. The accounts also state that provisions have been made to cover the potential cost of penalties for violations of anti-bribery laws. However, the scale of these provisions is unknown because the company’s accountants have taken advantage of a rule that allows provisions to remain secret if disclosure would be ‘prejudicial’.
The entire footnote reads as follows:
O2 has been addressing a request for disclosure made by governmental authorities which is related to possible violations of anti-bribery laws and regulations. O2 continues to co-operate with the governmental authorities investigating this matter which is still ongoing. Whilst it is not possible at this time to predict the full scope or duration of this matter or its eventual outcome, O2 was able to make a reasonable estimate of the outcome, and recorded an accrual during 2019, which is included in our statement of financial position as of 30 June 2021. Additional disclosures of the matters required by International Accounting Standard (IAS) 37 have not been provided as permitted by IAS 37 para 92 as the directors believe that further disclosure will be seriously prejudicial to future developments on this matter.
Industry rumors concern the possibility that former O2 executives paid kickbacks to valuable customers. However, not much is available on public record and O2’s media team are refusing to answer any questions about the subject. It may be several more years before the public learns the truth about any wrongdoing.
The telecoms sector should have been in a position to generate superior profits by using the vast amounts of data at its disposal to better analyze customers. Too often telcos have been run by numpties who relied on cruder methods to climb to the top and stay there. Next time you hear about a telco not being able to afford investments in analytics, assurance and risk management, consider which forms of expenditure the executive team are willing to indulge, and whether the returns they generate will match the fines paid years after they depart.