ED sees 2G scam link to WiMax companies

ED sees 2G scam link to WiMax companies

New Delhi: Is there a connection between the controversial allotment of airwaves to telcos and interactions between state-owned Bharat Sanchar Nigam Ltd (BSNL) and two private firms Wellcom Communications India Pvt. Ltd and Starnet Communications Pvt. Ltd regarding WiMax (worldwide interoperability for microwave access) services?

India’s Enforcement Directorate (ED), one of the agencies investigating the former, believes so.

“The ongoing investigations in Delhi zonal office in the spectrum scam indicate that M/s Wellcom Communications India (Pvt.) Ltd and M/s Starnet Communications Pvt. Ltd acted as associates of the companies/persons involved in the said scam. It is suspected that (they), through their associates/business partner companies/persons situated outside India, made financial transactions to camouflage real beneficiaries of the same," says an ED document seen by Mint.

BSNL’s interactions with Wellcom and Starnet came in the context of allowing private firms to offer WiMax services and happened when A. Raja was the telecom minister, but well after the allotment of airwaves to telcos that is now being investigated. The so-called spectrum scam dates back to early 2008 when rules for the allotment of second-generation (2G) mobile telephony licences and airwaves were allegedly changed to favour a few firms. The WiMax deal is as recent as 2010.

The ED document says the agency has initiated investigation of Wellcom and Starnet under the Prevention of Money Laundering Act, 2002. The agency suspects that the two firms were used to launder bribes that may have been received from companies that received airwaves in 2008.

A senior official with ED who spoke to Mint on condition of anonymity said: “Our investigation has given us some leads to these individuals and their companies in channelling the bribe. It appears that these entities are closely associated with Raja. Also, we cannot rule out it as a coincidence that these companies won another big-ticket deal in (the) telecom sector during Raja’s tenure. We are investigating that deal and its links to (the) spectrum scam. We are awaiting response for information sought by us from various countries."

Raja is currently in the custody of the Central Bureau of Investigation, which is investigating the irregular allotment of airwaves to telcos. WiMax is similar to Wi-Fi, and offers high-speed Internet access over large areas.

Starnet signed a franchise agreement with BSNL to offer WiMax services in four circles in 2010; Wellcom participated in a tender to offer franchise services in 2009, but was not shortlisted.

Wellcom Communications is a Malaysia-based firm with an Indian subsidiary in Chennai.

Starnet Communications is owned by a Chennai-based individual S. Manoharan and has an office in Gurgaon. The ED report claims an Israel-based firm seems to be associated with Starnet.

Emails sent on Sunday and phone calls made to the representatives of Starnet and Wellcom on Monday remained unanswered. The ED document says the agency has sent a request for information to its counterparts in Israel and Malaysia.

ED’s investigations into the role of the two firms in the spectrum scam has also prompted it and other agencies to closely took at the WiMax deal. An official at the Central Vigilance Commission, which seeks to ensure probity in government deals, and who spoke on condition of anonymity said the agency had started investigating this deal. Two government officials familiar with the development independently said that the government’s auditor, the Comptroller and Auditor General of India, is also contemplating a compliance audit of the WiMax deal.

Interestingly, in 2010, soon after BSNL signed a deal with Starnet, some representatives of the Communist Party of India (Marxist), or CPM, wrote to Prime Minister Manmohan Singh asking for a probe into the deal, calling it “another shabby deal after the 2G spectrum episode".

Prasanta Chatterjee, a CPM representative in the Rajya Sabha, said: Starnet is “virtually a non-existent entity and the income-tax return of the company, which is in my possession, proves that it is worth only a few lakhs and it does not have an annual turnover of Rs100 crore as stipulated by BSNL for the contract. It is amusing how this company got the deal worth crores".

Under the terms of the franchise deal, Starnet has to pay BSNL Rs2,280.98 crore for permission to offer WiMax services in four circles. In return, it gets 20-31.28% of revenue share and the right to use BSNL’s spectrum to offer services. In 2010’s auction of broadband wireless spectrum, BSNL paid Rs8,313.8 crore for spectrum across 19 circles.

Shauvik Ghosh contributed to this story.