Transparency in the telecommunications sector: TI calls for improvements

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Anti-corruption NGO, Transparency International (TI), recently published its report: “Transparency in Corporate Reporting – Assessing the World’s Largest Telecommunications Companies 2015 Report” (the “Report”) (available here), which suggests companies in the telecommunications sector should be doing more to increase their levels of corporate disclosure and mitigate their anti-corruption risk.

TI identifies the telecommunications sector as particularly vulnerable to corruption risk given it is a regulated industry, which requires government licences/approvals and involves significant capital outlays. The risk is amplified given that many of the key players are looking to expand into high-risk jurisdictions with underdeveloped anti-corruption regimes. It considers the key areas of risk for such companies to include: the licensing process; market regulation and price-setting; the supply chain; and third-party management and customer services. But in a sector estimated to be worth around US$2 trillion, some may consider the potential rewards outweigh the corruption risks.

It is against this backdrop that the Report reviews (by reference to publicly available information) the disclosure practices in 29 of the world’s largest telecommunications companies and 6 communication equipment companies, in respect of:

  1. their anti-corruption programmes – to confirm what policies and procedures were in place and publicly available.
  2. organisational transparency – the amount of information available concerning corporate structure, as TI notes: “Organisational transparency is important for many reasons, not least because company structures can be made deliberately opaque for the purpose of hiding the proceeds of corruption”.
  3. country-by-country reporting – the ability to collect financial data across all countries in which the company operates, which helps ensure that: “local governments and companies can be held accountable”.

Key Findings from the Report

Public information regarding anti-corruption programmes:

  • 83% of the companies reviewed state publicly that they are committed to complying with all laws, including anti-corruption laws, and they operate a confidential whistleblower line.
  • 83% demonstrated board/ management-level support for the anti-corruption programme, but only 50% had policies that expressly stated they applied to the company’s directors and only six companies provided an anti-corruption training programme for their directors.
  • Only half of companies have anti-corruption training programmes for staff.
  • Only half of companies prohibit facilitation payments, which are considered bribes for the purpose of the UK Bribery Act 2010.
  • Only 43% of companies have a mechanism for regular monitoring of their anti-corruption programme.
  • Typically the European companies performed stronger in this area than their Asian counterparts, whose disclosure was significantly weaker.

Organisational transparency:

  • Most telecommunications companies have a large number of subsidiaries, given their global operations. Overall, most companies only reported on their material or principal holdings, leaving significant gaps in reporting on the group’s operations.
  • Only four companies disclose full lists of their consolidated subsidiaries.
  • 77% of companies did not disclose where their subsidiaries operate and only partially disclose where they are incorporated.
  • Companies from jurisdictions requiring disclosure of all subsidiaries (e.g. Germany and India) performed better than those from jurisdictions with a more relaxed disclosure obligation (e.g. the US).

Country-by-country reporting:

  • 25 out of the 35 companies reviewed scored less than 30% in this area.
  • While most companies operate in a large number of jurisdictions, they do not provide financial data for each country and where they do report on financials, such disclosure is limited.
  • Revenue is the most commonly reported data, whereas profits before tax, capex and community contributions are less commonly disclosed.
  • 57% of companies do not report on the amount spent on community projects in their foreign operations.
  • 43% of companies do not make political donations public, two-thirds of which are Asian companies.
  • Only four companies disclose information on their tax payments in each of the countries in which they operate.

General findings:

  • European companies performed strongest in all areas of disclosure, whereas Asian companies are the poorest performers in respect of disclosing their anti-corruption programmes and country-by-country reporting. American companies performed the poorest in organisational disclosure.
  • In comparison to TI’s 2014 non-sector specific report on Transparency in Corporate Reporting – Assessing the World’s Largest Companies, telecommunications companies performed on a par with (or in respect of country-by-country reporting, better than) the companies subject to that report.


Unsurprisingly, given its stated objectives, TI suggests that more could be done by those operating in the telecommunications sector to improve the levels of corporate disclosure, particularly to demonstrate how they are addressing their corruption risk and transparency concerning revenues and expenditure on a country by country basis. Indeed, some see such transparency as a vital protection against corruption in developing countries by ensuring that revenues earned and payments made in those countries are public. This is a key element in the implementation of the EU Transparency and Accounting Directives’ requirements regarding transparency of payments by extractive businesses to public bodies (read our previous LawNow on these Directives here). The changes brought about by those Directives followed fast on the heels of similar transparency requirements being introduced in the lifesciences sector.

The onerous requirements of these Directives could be extended to other sectors in due course and there is specific provision within the Accounting Directive for its scope to be reviewed in 2018. TI’s highlighting of perceived weaknesses or failures in this regard by telecommunications companies may in due course be considered by the EU lawmakers when considering whether to extend the scope of the Accounting Directive.

TI expects those operating in the sector to obtain 100% against its assessment criteria and provides a range of recommendations for businesses in the sector, as well as to governments and regulatory bodies, to investors and to civil society organisations. However, there is nothing new or innovative about its recommendations and they can be applied equally to businesses in any sector looking to bolster their existing anti-corruption programmes and transparency levels (e.g. publish their policies online, prohibit facilitation payments, monitor anti-corruption programmes and get management buy-in on the programme).

But the Report does highlight the geographical differences in approach and the fact that, despite some very public anti-corruption initiatives across the region, Asian companies are still falling behind in terms of anti-corruption protections and corporate transparency. This could be the result of a number of factors but the more developed and consistent anti-corruption regimes across Europe and relatively high enforcement rate against telecommunications companies in Europe and the US could account for the better performance of some Western companies.

Finally, it is worth noting that TI’s review is not without limitation, given it only looked at 35 companies in the sector (albeit the largest) and only at information publicly available during a limited time-frame. The review did not look further to establish what was going on in those particular companies at that time and they did not engage directly with the companies themselves; various factors could explain or influence decisions to disclose certain categories of information but not others or the status/content of the company’s anti-corruption policy.

Save the date:

CMS International Corporate Crime Conference

Date: 15 April 2016

Timings: 10:00 – 17:00; followed by drinks

Venue: CMS, London, 78 Cannon Street, London, EC4N 6AF


  • Keynote address by Professor Christopher Hodges of Oxford University and author of Law and Corporate Behaviour: Integrating Regulation, Enforcement, Compliance, Culture and Ethics (Hart Publishing, 2015).
  • A series of thought provoking panel discussions with our guest speakers from industry, government and law enforcement.
  • Networking over Drinks and Canapés.

Further details to be released in due course. To save the date click this link and Add to Calendar.