T-Mobile US CEO John Legere may find himself in a bit of hot water after CtW Investment Group claim to have uncovered some slightly underhanded accounting practises in the business.

In a letter written to the US Securities and Exchange Committee (SEC), CtW Executive Director Dieter Waizenegger requested the regulator investigate accounting activities at Deutsche Telekom’s US business specifically relating to revenue estimates from its sales of Equipment Installment Plans (EIPs) among other areas.

The SEC does allow companies to give investors non-standard metrics during earnings calls, but requires that the companies also detail exactly how the metrics differ from the closest GAAP measures. CtW claim T-Mobile have not been giving enough information to investors leading to misleading figures, profits and cash flow.

The call-to-action will not be welcomed by execs at the German telco, as the US business is one of the stronger performers in the group over the last couple of quarters. During the most recent earnings call, revenues grew by 5.9% to €18.1 billion with the US business accounting for €8.2 billion, a 17.3% year-on-year increase.

The first base of the complaint is how effectively the team estimate revenues for the EIPs. The EIP is essentially a subsidized payment plan for handsets, but one where customers have a wireless service contract without a fixed term. Customers are given the opportunity to purchase a handset from T-Mobile US through an Equipment Installment Plans, which typically have a two-year term, and which require the customer to pay off any remaining balance on their EIP if they cancel or switch to a new carrier.

CtW claim many customers appear not to have understood the terms of the contract, or misunderstood the ‘no strings attached’ claim from the telco, and have been unable to meet their contractual obligations. If this is the case, T-Mobile would not be able to collect the revenue associated with these plans, and thus annual profits would be impacted.

In the letter, CtW argues that at a time where T-Mobile should have been increasing the amount of cash available to cover future defaults on phone installment payment plans, it was in fact decreasing it, which boosted profits, misrepresenting the current state of play at the business.

“Despite the decrease in allowance for credit losses, all of the publicly available indicators of potential credit risk within TMUS’s EIP receivable pool implied that if anything, credit risk was increasing rather than declining,” the letter reads.

Another area which caused concern for the CtW was that over the course of 2015 the T-Mobile team shifted some customers from phone installment payment plans to phone leases. While this move should have impacted the cash flow of the business, it was not detailed by the accounts in feedback to investors. CtW highlights the number of Prime and Subprime customers has dramatically shifted over recent months (see table to the right), a change which investors should have been more aware of as Subprime customers are notably more likely to default on contracts.

The team also excluded the amount which it spent on spectrum licenses when it reported its free cash flow. CtW claim T-Mobile did not include the $4.6 billion it spent for the licenses making its cash flow look significantly stronger over the period.

How the SEC will follow up the letter from CtW is not known yet, though T-Mobile has been quiet, and it is unlikely this will be welcomed by the team at group level. The US business has been reporting strong growth numbers for Deutsche Telekom while the European units have been struggling; any accounting errors may lead to some red faces.