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Govt seeks ‘transparency’, puts 85 licencees on notice

Telecom companies which are likely to get the show cause notice include Loop, Stel, Unitech (now Uninor), Datacom (now Videocon) and Swan (now Etisalat).

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In the first major effort to cleanse the system after former telecom minister A Raja’s exit, the department of telecommunications (DoT) has decided to send show cause notices to all new operators, asking why their licences should not be cancelled over violation of eligibility conditions. The operators, 85 in all, will have two months to reply.

Telecom companies which are likely to get the show cause notice include Loop, Stel, Unitech (now Uninor), Datacom (now Videocon) and Swan (now Etisalat). In addition, notices would be sent out to some new licencees as well as some established telcos for not fulfilling the rollout obligations.

However, telecom minister Kapil Sibal was cautious enough not to take names at the hurriedly called press conference on Monday to announce the government’s initiative on “transparency”. The announcement comes a day before the Supreme Court hears the 2G spectrum scam case.

“It is time to issue notices to those who suppressed information and got undue advantage in accessing licences,” Sibal said. He said the show cause would be sent to 85 licencees for not complying with eligibility conditions in relation to the memorandum of association, registration norms and minimum paid up share capital. The minister indicated that by skipping the proper registration route, some firms were able to jump the queue and go ahead of others.

In its report, the Comptroller & Auditor General of India (CAG) had said that 85 licencees had breached the eligibility norms. But Sibal said that the report was an opinion and that the government would come to a decision based on the merit of each case.
On rollout obligations, Sibal said the violations go back to 2006.

There were 119 instances of rollout violations, including those by some established players. Sources said that Vodafone and Idea were among the established telcos which did not comply with the rollout norms in some of their new circles.

The government is looking at liquidating damages, with a deadline of 52 weeks, to address the breach. For instance, for a 12-week delay, the government could impose a penalty of Rs6 lakh per licence per week. Beyond a delay of 52 weeks, the licence could be cancelled.

According to licence conditions, companies have to cover at least 10% of the district headquarters within one year and 50% by the end of the third year in non-metro licence areas and 90% in metro areas. Sibal pointed out that the government was looking at formulating a new policy framework for the telecom sector.

On the issue of why several foreign telecom companies, which had acquired significant stake in the new licencees much after the licence allocation process, should be penalised now, Sibal said,

“If anyone invested in a company, that has nothing to do with the government.” He added that foreign companies have access to the best legal advice.    

The minister refused to get drawn into issues like dual technology licences and pricing of spectrum. On the licences issued to Swan Telecom, he said DoT was referring the matter to the ministry of corporate affairs.

“If there was any wrong doing in the case, we’ll take action,” he added. Reliance Communications, which had a stake in Swan earlier, said, “We welcome the communications minister’s statement on referring the capital structure and ownership of Swan Telecom for independent examination by the ministry of corporate affairs.” RCOM added that “the doubts raised by the CAG in this regard, without even seeking our explanations, are entirely incorrect and unjustified.”

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