Fifa careful on Satyam troubles

By Candice Jones, ITWeb online telecoms editor

Johannesburg, 12 Jan 2009

Fifa has downplayed concerns over troubled Indian-based technology company, Satyam, which was contracted to maintain the computer support for next year's Soccer World Cup.

ITWeb contacted Fifa after reports surfaced exposing Satyam's founder and chairman Ramalinga Raju's resignation letter, which revealed the company had been inflating figures by up to $1 billion for years.

The soccer organisation says: “Fifa is monitoring the situation related to Satyam, a company which provides services of technical support to Fifa. At this stage, and until we have more information, it is too early for Fifa to make any further comments on the matter.”

However, sources close to the situation say Fifa is more concerned about the situation than it has revealed. The sources say that, after the reports surfaced, the organisation called several emergency meetings to discuss the situation. There has been no indication as to what decisions were made at these meetings.

India concerned

The scandal sent Satyam reeling and stocks plunged by 80% before the New York Stock Exchange halted trade on the company entirely, last week. It is being called the biggest scandal in Indian business and has the country concerned that its reputation for top-class IT outsourcing business has been tarnished.

The local arm, employing over 120 staff, has attempted to reassure its South African customer base, which includes Fifa and the Local Organising Committee. Satyam holds an exclusive telecommunications partnership deal with Faritec; it is part of the Bophela Consortium, which last year won the State IT Agency's R1 billion, 10-year contract for the establishment of a national health record system. The company also has extensive ties in local skills development, with roughly 45 South African students currently on exchange in India.

Satyam SA country manager, Chittaranjan Jena says: “It is a challenging time for all of us. However, we want people to know things are business as usual, and we are committed to all the clients we have partnered with here in SA.”

Life after scandal?

Irnest Kaplan of Kaplan Equity Analysts says that, while he can't comment on Satyam's situation directly, not having studied the shareholder base, any company that goes through a situation like this is unlikely to survive.

“If a company blatantly changes the revenue numbers, it will turn out to be disastrous for its credibility. There is a real fear that damage like that can never be repaired,” he says.

Kaplan believes investors would get out of the company as soon as they could and most likely never return to it.

He says companies could try to act quickly to replace the people involved in the scandal, which Satyam has already done. “On the other hand, the company's reputation could be so tainted that contractors could think that others still within the company could be involved.”

Kaplan says it's not only investors that would be concerned. “Clients and future clients may well consider dropping business, or never doing business with that company again.”

He adds that there have been few scandals of this nature, since most companies are too afraid to lose credibility on this scale.