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Telecom Troubles: CBI Chargesheets; DoT Vs Idea-Spice; Telenor Vs Unitech

Trouble in Telecom, lending further uncertainty to the space:

– India’s Central Bureau of Investigation has filed chargesheets against nine persons and three private companies, relating to the issuance of new Unified Access Services Licences and subsequent allocation of 2G Spectrum (the 2G Scam). The CBI hasn’t disclosed names, but charges have been filed against the then “Telecom Minister; the then Secretary(Telecom); the then Private Secretary to the then Telecom Minister; two Directors of Mumbai-based private company who were also Promoters of a Mumbai-based private company; Managing Director of a Gurgaon-based Real Estate Company, and Group Managing Director & two Senior Vice Presidents of a Mumbai-based Telecom Company. Two Mumbai-based private telecom companies and one Gurgaon (Haryana)-based private telecom company”. Source: CBI Press Release

Reliance Communications has since clarified that charges have been filed against Reliance Telecom Ltd, and three persons who are a part of the Reliance ADA Group: Gautam Doshi, Surendra Pipara and Hari Nair. They’re denying the charges and have said they will defend themselves in the appropriate legal proceedings.

Do read this report in Tehelka on “How the cash flowed“.

– Telenor and Unitech battle it out over Uninor rights issue: After Uninor proposed a rights issue to fulfill its funding requirements, the JV’s Indian partner, Unitech got a stay order from a local court in Gurgaon, NCR, reports MoneyControl. At the time of announcing its Q4-10 results, Telenor had said that debt funding through bank loans was  not feasible owing to the ongoing 2G spectrum turmoil. It had accumulated operating cash flow losses of Rs 7,900 crore as of Q4 2010. A short term facility of Rs 2,500 crore was refinanced in the quarter for Uninor. Telenor owns 67.25% in Uninor, while the Unitech Group owns 32.75%; Telenor cannot hold more than 74% in Uninor, as per Indian Foreign Direct Investment rules. Meanwhile, Telenor’s investment in Uninor (rather, Unitech Wireless) is being investigated by the CBI, and the Norwegian Prime Minister has raised concerns around cancellation of licenses, reports InToday.

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– Idea-Spice Merger Stayed: Idea Cellular’s newly appointed Managing Director Himanshu Kapania has received a rather rude welcome from the Department of Telecom. According to multiple media reports (read this one in the Hindu), The Delhi High Court has stayed, ex-parte, the 2008 merger between Idea Cellular and Spice Telecom, on the basis of a complaint by the Delhi High Court, that the deal between the two operators was in violation of the licence conditions. The deal involved six overlapping licenses, and the financial details of the merger are available here (pdf). On Feb 22nd 2011, Idea Cellular had issued a statement saying that the merger was approved by the Courts, and despite being issued spectrum for five of six circles, it had advised the DoT that it “was not using such spectrum, in effect, placing overlapping licenses in a de facto escrow, pending receipt of the DoT’s formal letter of merger, including surrender if at all that was attracted. The court merger was consummated with the full knowledge and support of the DoT, over a year ago. For reasons incomprehensible, the DoT has so far not issued merger letter in consonance with the court approved merger. The company has asked for merger of licenses as per guidelines, which incidentally yields the company nothing beyond the incumbent license original entitlement, merger or no merger. On the specious pretext that the licenses in Punjab are not formally amended by the DoT, even though the Company was pre-qualified by the DoT, was declared auction winner by the DoT, has paid Rs. 322 Cr to the DoT, was issued Letter of Intent by the DoT, and been earmarked 3G spectrum by the DoT, the DoT has yet to allot 3G spectrum for Punjab.”

“The Company has paid Rs. 843 Cr Entry Fee for the overlapping licenses, maintained BGs of Rs. 350 Cr, but has derived NIL benefit. Over the last 30 months, Idea has pursued the matter with 20 letters and a half dozen meetings, to which a deaf ear has been turned. No license condition has remotely been breached, indeed it could not have been. It is Idea, which is the aggrieved party, and driven to the wall by the inert approach of the DoT, has approached the TDSAT for succour.”

Now the DoT has had the merger stayed, ex-parte.

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