dot-cvc-cbiThe Central Bureau of Investigation (CBI) has registered a corruption case against senior officials working in the Indian Department of Telecommunication (DoT) as well as private persons and companies under section 13(1)(d) of the Prevention of Corruption Act. The DoT is the nodal body that issues policies and licences in India. The CBI raided offices of the Wireless Planning Cell and the Deputy Director General (Access Services) on Thursday attempting to collect incriminating documents.

An official communique from the CBI reveals: “there was criminal conspiracy between certain officials of Department of Telecommunication (DoT) and private persons/ companies and others in order to award licenses to these companies by putting a cap on the number of applicants against recommendations of Telecom Regulatory Authority of India (TRAI) and by awarding licenses to private companies on first come first serve basis on the rates of 2001 without any competitive bidding.”

According to the Times of India, the Central Vigilance Commission had asked the CBI to investigate the identities of all beneficiaries of stakes bought in Uninor (previously Unitech Wireless, which is now owned by Telenor) and Etisalat DB Telecom India (previously Swan Telecom). An order in May by the Indian telecom regulator TRAI to inspect financial records of six new telcos showed that many had multiplied their value by selling stake within months of receipt of licenses, without having a single customer.

The raid follows an attempt in April by the Central Vigilance Commission to identify who was responsible for what various industry personnel and press reports alleged as major irregularities in the distribution process:

  • Allocation was non-transparent: The manner of selection of new 2G licensees by the telecom ministry was unclear to the industry.
  • There was no competitive bidding process; licences were given on a “first come first serve” basis as decided by Telecom Minister A. Raja. Raja has not been mentioned by the CBI and according to the Hindu) has refused to resign in the wake of raid.
  • Cap on the number of applicants – Flouting a recommendation by the TRAI, the ministry cut off the number of applicants at 120 when there were 575 applicants registered. The last date for applications was suddenly shifted to September 25, 2007 when the official date was October 1, 2007 and there was confusion amongst applicants whether the selection for awarding licences was on the basis of date of application or of licence fee payment.
  • Tender documents showed loopholes that allegedly benefited some companies.
  • Licences were issued at a substantially low price fixed in 2001, which has reportedly caused the exchequer losses to the tune of Rs. 50,000 crore.

The Timing Of The Raid

Interestingly, this raid comes on the back of two recent developments: an additional delay of the auction of 3G spectrum, with Telecom Minister A Raja saying that it is due to a delay because – odd as it sounds – foreign bidders wanted a Christmas Holiday, later blaming it on the defence forces. The Finance Minister, Business Standard reports, has said that no delay is possible. The CVC report came out in May. Why did it take the CBI three months to act upon it? The other development to keep in mind – perhaps related – is the reported rejection of the acquisition of Allianz Infratech by Etisalat DB. Allianz had received a license six-odd months after the 2G license allocation being investigated by the CBI.

Consequences?

Now that the entire spectrum allocation process has come into question as the possible hotbed of criminal activity, what will happen to the licences; will telcos get a second chance to apply for 2G in India? And what happens who won the licences – they might have to put their roll out plans on hold while the CBI conducts it investigations. The auction of 3G licences has been delayed for years, and it now appears that there might be more hold ups. The process also has been tainted – will the government be forced to set up a new, transparent system for allocation of licences? Delays are choking up the Indian telecom sector; are we ever going to catch up?

(with inputs from Nikhil Pahwa)

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