Telecom dept under CBI lens over licensing

Telecom dept under CBI lens over licensing

New Delhi: Since early 2008, the Indian telecom sector has been abuzz with unsubstantiated allegations in how new licences were awarded to some companies that wished to enter the country’s fast growing mobile telephony business.

On Wednesday, the federal investigative agency, the Central Bureau of Investigation (CBI), registered a case under the country’s Prevention of Corruption Act against unnamed officials in the department of telecommunications (DoT) as well as private individuals and firms, a statement from the agency said.

CBI didn’t provide details of the officials and companies being investigated. In January 2008, six companies were given licences along with bundled 4.4MHz spectrum (or airwaves) to start mobile services.

Telecom minister A. Raja, who happened to be in charge of the portfolio in January 2008—he retained the portfolio after the general election earlier this year—told television channel CNBC-TV18 that the allotment of licences and spectrum companies need to offer services had followed the precedent set by earlier rounds of such allotment.

Six firms—Swan Telecom, Unitech Wireless Ltd, Datacom (owned by the Dhoots of Videocon), Loop Telecom (controlled by BPL Telecom, which itself is controlled by Essar Group), STel, Sistema Shyam Teleservices Ltd— were awarded licences in January 2008.

A spokesperson for Unitech’s telecom venture said the company couldn’t comment on the issue because investigators hadn’t approached it yet. Loop and STel spokespersons declined comment on the issue. An Etisalat spokesperson didn’t respond to an email seeking comment.

On Thursday, a team of around 30 officials from CBI searched the offices of DoT at Sanchar Bhavan.

A DoT official, who did not want to be identified because he isn’t the department’s official spokesperson, confirmed that a search was on.

CBI spokesman Harsh Bhal told Mint on Thursday evening that the officials were continuing to search the “premises for evidence".

The agency’s search comes five months after a recommendation by the Central Vigilance Commission (CVC) that it probe the process by which licences and spectrum were awarded in 2008. CVC is the oversight agency for government departments.

CBI’s statement said that it was looking into allegations that the licences and spectrum were improperly awarded, ignoring a recommendation from the telecom regulator Telecom Regulatory Authority of India (Trai) that there be no cap on the number of applicants. It added that it was also looking into why the licences were awarded on a first-come-first-served basis, and at the same rates at which they had been awarded in 2001 and why there had been no competitive bidding.

A.K. Srivastava, deputy director general, access services, DoT, whose department is in charge of licensing, and whose office was also searched, couldn’t be reached for comment.

DoT’s pricing model for the new licences has come under severe criticism from analysts and political rivals of the ruling United Progressive Alliance government. The department charged Rs1,651 crore for a licence and start-up spectrum. The criticism has been fuelled by subsequent deals where companies that won the licences sold stakes in themselves to multinational telcos for far higher amounts.

Swan Telecom is now called Etisalat DB Telecom India Pvt. Ltd after the United Arab Emirates-based Etisalat paid over $900 million (Rs4,203 crore now) for 45% stake in the firm which has a licence to operate in 15 circles, but is yet to start operations.

Sanjay Chandra-promoted Unitech Wireless recently got approval from the government to sell 67% stake to Norway-based Telenor for more than Rs6,000 crore. The deal was announced in October 2008.

An expert said he was unsure about the result of CBI’s search.

“Whether they will find sufficient evidence is still to be seen," said regulatory expert Mahesh Uppal, who is a director with Com First (India) Pvt. Ltd, a communications consulting firm. Still, “there is a widespread belief that the irregularities have happened due to the connivance with the officials in the DoT".

Existing telcos had protested the entry of new players in 2008, citing the scarcity of spectrum.

“It is because of these irregularities that spectrum in the country is in a complete mess. There are an unsustainable number of operators in the market, and the government has lost a lot of money for not getting a fair price for the spectrum," Uppal added.

The last time CBI raided DoT was in 1997 in a case that ultimately led to the conviction of then communications minister Sukh Ram and DDG (licence finance) Runu Ghosh.

The scam involved DoT officials favouring a Hyderabad-based private firm that had provided substandard equipment, resulting in a loss of Rs1.6 crore to the government. A raid by CBI had found Rs3.6 crore in Sukh Ram’s house.