First steps in telecom crackdown

Why shouldnt you lose 2G licences,Sibal asks 85 firms

In just over a fortnight of replacing A Raja as the Union telecom minister,Kapil Sibal on Monday acted on the reports of the Comptroller and Auditor General CAG of India and the Telecom Regulatory Authority of India Trai,and issued notices to 85 companies asking why their licences should not be cancelled.

Stating that the CAG report is an opinion,and that his Ministry had done its homework,Sibal said the shortlist of 85 was arrived at based on charges that they got licences illegally. These companies have been asked to reply within 60 days of receiving the notice.

The companies that will be impacted by Sibals decision include Unitech now Uninor,Swan now Etisalat DB,Loop Telecom,Datacom now Videocon,Allianz Infratech now merged with Swan,and S-Tel. All these companies have been charged with suppressing vital facts,not having the requisite Memorandum of Association articles showing telecom as a sector of activity,and not meeting the net worth criteria for getting the licences on the date of filing their applications.

Specific to Swan,Sibal has ordered an inquiry by the Ministry of Corporate Affairs into whether Anil Ambanis Reliance Communications held more than 10 in Swan at the time the company applied for licences in March 2007.

The CAG report had categorically said that at the time Swan applied for a licence,Reliance Communication held more than 10 equity in it. The DoT had justified this to CAG in its reply,saying that RComms equity holding was less than 10,and the rest was actually in the nature of preference shares which are not counted as equity. In fact,it said that RComm paid a huge premium for these preference shares.

Taking this into account,RComms shareholding,in terms of the capital base of Swan,was well over 90 at the time it applied for a licence,making it clearly ineligible for applying. The cross-holding norm bars a telecom service provider to have more than 10 stake in another company in the same circle.

The decision by Sibal to issue the show-cause notices is a powerful indictment of former telecom minister Raja,who awarded the licences to these firms,and failed to act when wrongdoings were brought to light.

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After looking at the CAG report and analysing the whole matter,we have come to the conclusion that we would issue show-cause notices to those who we believe suppressed facts for unduly receiving the licences, Sibal said at his first press conference after taking charge as telecom minister.

Sibal also issued show-cause notices to 119 firms for failing to meet the stipulated roll-out obligations. Though he clarified that this includes companies who got licences in 2006,the list contains 81 entities who were given licences by Raja in 2008.

The show-cause notices here are for levying penalties,and not cancellation,but in the light of the earlier show-cause,this becomes superfluous. However,here again Sibals action has indicted Raja,who had been telecom minister since May 2007,but did nothing on this front.

Sibal also said that the government is not averse to the Supreme Court monitoring the 2G spectrum scam being investigated by the CBI.