Ofcom fines BT for suspect accounting

Ofcom has fined BT £3,727,330 for reporting inaccurate financials to the regulator, leading to the telco paying lower administration fees to the regulator for five years.

One of the ways in which Ofcom funds its activities is to charge certain companies an annual administration fee. This fee is determined by the total revenues generated by the company. As BT reported inaccurate results between 2011 and 2015, it paid lower administration fees throughout this period.

BT has not contested the fine, and the full sum had been paid to Ofcom on July 29.

“BT’s cooperation with Ofcom in relation to this investigation has been extensive and productive,” Ofcom said in the report.

“Upon discovery of its error, BT informed Ofcom and committed to remedying the consequences of its error. BT has also undertaken extensive work to ensure that its final resubmitted turnover is complete and accurate; had Ofcom had to carry out this work itself, it is likely to have required significant resource and time to complete.”

Although BT does not have the most glimmering record when it comes to accounting in recent years, the telco did own up to the error rather than Ofcom being informed by a whistle-blower.

The error seems to have been identified by BT Group CFO Simon Lowth, who had only been in the role for a year at the time. In September 2017, documents were submitted to Lowth to review the submission of annual turnover for 2016. Upon reviewing the document, Lowth ordered an investigation into the previous submissions dating back to the original General Demand for Information in 2011.

BT believes the oversight was down to human error, an employee misunderstanding the data sources used, though it still does not the most complementary light on the accounting practices of the business.

Aside from this oversight, BT is still reeling from the Italian accounting scandal which was unearthed in 2016. The fraud cost the company more than £530 million, with £8 billion being wiped off the telcos market value in a single day. US investors, represented by law firm Robbins Geller Rudman & Dowd, have recently announced a lawsuit to recover some of the losses.

The £3,727,330 fine might be considered a relatively lenient one, though generally regulators are kinder to the guilty party if it admits to wrong-doing without prompt. The sum was calculated by adding the deficit to interest payments. The Bank of England base interest rate during the 2011-15 period was increased by 1% to get the total.

It is difficult to blame the current management team and workforce for this error, it would have been prior to the tenure of many employees, though it does not reflect well on a company which is attempting to prove it is a successful business.

Synchronoss allowed off the Nasdaq naughty step

The Nasdaq stock exchange has had a look at Synchronoss’ belated accounts and decided everything is now sufficiently in order for it to be re-listed.

Regular readers of Telecoms.com will be familiar with the accounting soap opera that has plagued cloud services vendor Synchronoss for the past couple of years, resulting in it being kicked  off the Nasdaq earlier this year. Accounts were finally filed in July and it will presumably be of immense relief to everyone connected to the company that the man from Del Nasdaq, he say yes.

“This is a major milestone for Synchronoss,” said Synchronoss CEO Glenn Lurie. “Meeting our SEC financial reporting obligations and Nasdaq listing requirements has been a top priority since I joined the company last November, and the lifting of the Nasdaq suspension achieves that objective.”

“We are now exclusively focused on executing on our strategic priorities and laying the foundation for improved growth and profitability in 2019 and beyond. We are in the right place at the right time to prosper as the telecommunications, media and technology industry turns to digital innovation.”

That’s the ultimate point. Lurie can reasonably claim none of the responsibility for the mess created by the previous administration (although he presumably did his due diligence before joining) and now that it’s all sorted he just wants to get on with the day job. That’s fair enough and it would presumably help if hacks didn’t keep digging up the past, but what can you do? You can start trading SNCR on the Nasdaq again from next week.

Synchronoss misses deadline for restating accounts – Nasdaq delisting looms

Telecoms cloud services provider Synchronoss has missed a deadline for restating its accounts, making it likely that it will be delisted from the Nasdaq.

When we spoke to CEO Glenn Lurie at MWC earlier this year he was excited about getting all this accounting business sorted and being able to focus entirely on the future. By the end of March Lurie and his CFO were still confident of hitting the 10 May deadline. But in the intervening month or so it became clear that the web of Synchronoss accounts for the past few years was just not going to be fully untangled by today.

“We are disappointed in our inability to meet the May 10 deadline for regaining compliance with Nasdaq listing requirements,” said Lurie. “However, we have made tremendous progress and expect that the audit will be completed no later than June 30, 2018. I also want to thank Ernst & Young for the efforts it is making toward completing the task at hand.”

“Our underlying business is solid and sound,” added Lurie. “We have a strong financial profile with ample liquidity. At the end of the first quarter we had approximately $300 million in cash. Further, as evidenced by our recent announcement that we have entered into an agreement to acquire honeybee Digital Solutions, we are aggressively executing our strategy of putting in place the right people, product portfolio and customer base for long-term profitable growth.”

We checked in with Synchronoss CMO Mary Clark and she echoed the feeling of disappointment. These accounts are a massive sword of Damocles hanging over the new executive team that had no involvement in whatever dodgy book-keeping contributed to this situation and you can tell from Lurie’s official statement how desperate the team is to focus on positive stuff.

Clark told us there has been no correspondence from Nasdaq on the missed deadline but the strong implication from previous statements is that Synchronoss will be delisted. While that would be bad, there is presumably a path toward relisting once they finally get their accounts in order. Synchronoss shares fell by around 20% on the news.

The tone of our conversation took on a much more positive tone when we asked Clark about the recent acquisition of Honeybee Digital Solutions, a ‘customer journey’ software specialist that had been created by Carphone Warehouse here in the UK. This acquisition is designed to augment the Synchronoss legacy handset activation business and Clark said she was excited about the technology and talent it will add to the business.

Under Lurie and Clark Synchronoss is crystallising its identity as a B2B2C partner for operators, providing white-label digital products and services for them to pass on to their customers in the hope of adding a bit of value to their experience. This is the message they desperately want to evangelise, but it looks like they’ll have to wait another month or so to be able to.