Department of telecom may cancel new operators' licenses: CAG

The Comptroller & Auditor General (CAG) report on the sale of 2G licenses has put a question mark over the future of at least half of the private telecom operators in the country today. According to CAG’s audit, allocation of no less than 85 licenses -- or around 4 operators per state -- was illegal and the department of telecom is contemplating issuing termination notices to them.

 

“Since these Companies did not meet the eligibility criteria set by the [department of telecom] DoT on the date of their application, their applications should have been rejected and they should have been asked to apply afresh as stipulated in the UASL guidelines.

The DoT, when pointed out the above, informed that based on the audit observation, issue of show cause notices for termination of the UAS Licenses to all the erring companies was being contemplated,” the audit report, signed by RP Singh, director general of audit, said.

 

The new telecom and IT minister Kapil Sibal, however refused to comment on the matter, pointing out that he has not had time to study even a single file in his new ministry yet. “It is very unfair of you to ask me this,” he retorted when asked about his next step.

 

The CAG pointed out that according to the license conditions, any firm which is shown to have misrepresented itself is liable for an outright cancellation of its license. Yet, it pointed out out, all 85 of the 122 new licenses awarded in early 2008 -- which went to new operators -- were illegal in one form or the other.

 

“Eighty five licenses were issued to the Companies which suppressed facts, disclosed incomplete information and submitted fictitious documents to the DoT and thus used fraudulent means for getting UAS licenses and thereby access to spectrum. Owners of these licenses, obtained at unbelievably low price, have in turn sold significant stakes in their companies to the Indian/foreign companies at high premium within a short period of time,” the report noted.

 

Among the ‘illegal’ licenses flagged by CAG are all 22 licenses secured by real estate group Unitech, 21 licenses issued to Loop Telecom (owned by the Essar group), all 22 licenses of Datacom (now Videocon), 6 licenses of S Tel and the 14 licenses issued to the Balwas who in turn tied up with the UAE-based Etisalat.

 

While Swan (now Etisalat DB) was found to have hidden the full extent of a stake by the Anil Ambani group when it submitted its application in 2006, the others were found to have overdeclared their network and share capital to qualify for the licenses.

Loop and the Unitech firms -- which divested part of their ownership to the Scandinavian Telenor group -- were also found to have misrepresented their fundamental company documents -- such as the articles of association which define the goals and purposes of the company.

 

The CAG also found that the government should have imposed a fine of around Rs679 crore from these operators for failing to roll-out their services according to the conditions attached in their licenses.

 

“These licensees were required to roll out the services in the 90% service area in Metros and 10% District headquarters (DHQ) in other service areas within 12 months of the date of award of licences... [However] none of them had rolled out their services as per the provisions of the UAS Licences in any service area till 31 December 2009,” it pointed out.

 

The Anil Ambani group, which was quick to point out that it had divested its Swan Telecom stake before the award of the license, was also found to have been illegally favored by Raja in allocation of spectrum. CAG pointed out that the group seems to have got GSM spectrum ahead of others due to favorable treatment from the minister.

 

The auditor, however, did not leave the oldest and the biggest operators like Bharti and Vodafone either. It pointed out that they held substantial amounts of spectrum above and beyond what they were eligible to get, without paying a Rupee to the government.

 

Estimating the value of such spectrum at more than Rs2,600 crore according to 2000 prices, CAG pointed out that market value of such spectrum is likely to be many times more. It pointed out that the telecom regulator has already put a price-tag of Rs36,993 crore on the same.