A Rs. 600 crore deal, wherein the Indian Space Research Organization (ISRO) leased 60 Mhz of spectrum to little known Devas Multimedia five years ago is now under the scanner, reports the Economic Times, citing sources. We had written about Devas in the past, in 2008, when it received an approval from India’s FIPB for raising $75.75 million from German major Deutsche Telekom, thus valuing the company at $443 million. At that time, the company didn’t even have a website, and very little could have been ascertained about them, and what they were planning to do.

The legitimacy of the deal is being questioned. Devas seeks to offer data services to mobile terminals – streaming video, audio, web access, on PC data cards, mobile phones, and vehicle-mounted devices.

ET quotes anonymous executives offering two opposing sides to this issue of allocation of spectrum:

– That ISRO was not authorized to lease out the spectrum, and a probe into the Devas deal began when demands were made for broadband spectrum in the 2.5 GHz band to be auctioned.
– That Devas took a risk by leasing this spectrum, when no one else was willing to, and invested close to $300 million in order to launch services, and one can’t penalize the company just because the value of its spectrum as appreciated.

According to Devas’ website:

– It was founded by MG Chandrasekhar, and ISRO veteran
– Has been funded by Deutsche Telekom, Columbia Capital and Telcom Ventures.
– It has on its board of directors, Kiran Karnik from NASSCOM and Satyam Computers, as well as executives from ISRO / Antrix Corporation, Sirius XM Satellite Radio, Warburg Pincus.

Our take on this deal is that if a deal was inked by an agency not authorized to license spectrum, then it is invalid from the very beginning. That’s what the government and courts will have to determine. A lot of money – $300 million according to an ET source – has been invested over a long period of time. Either this deal will be legitimized (if it is indeed not legit), or heads will roll.

The other, perhaps more important point to note, is that according to the ET report, Devas is on the verge of launching services. Telecom operators have paid a lot more money for 3G and BWA spectrum, so perhaps there may be a move to delay or prevent Devas’ launch by questioning the legitimacy of the deal.

Do read the extensive report on ET here. We haven’t heard the last of this.

Related:

Devas Multimedia’s request to introduce a new foreign collaborator approved
Deutsche Telekom Eyes Indian ISP Space; Devas Multimedia Looks To Raise Funds
Mobile TV Co Devas Multimedia To Sell 17 Pc Stake For $75 Million To Deutsche Telekom