S Tel moves FIPB even as DoT orders closure

The proposal to increase the foreign direct investment (FDI) in mobile telecom operator S Tel is scheduled to come up this Friday at the meeting of the Foreign Investment Promotion Board (FIPB) in the finance ministry.

Ironically, the proposal is listed for FIPB’s consideration when the Department of Telecommunications (DoT) has asked S Tel to stop its services for security reasons.

Sources said S Tel, which offers mobile telephony in Himachal Pradesh, Bihar and Orissa, is continuing with the services despite DoT’s order last week. It is learnt that S Tel is in dialogue with DoT, and is hopeful of a resolution in a few days.

However, there’s another side to the story, indicating that the DoT order to S Tel could be more political than meets the eye.
“It’s a DMK vs AIADMK battle” is how an industry insider described the DoT order.

While communications minister Andimuthu Raja is a DMK member, S Tel is a joint venture between the C Sivasankaran group and Batelco Millennium India (a telecom company of Bahrain).

Sivasankaran is believed to have enjoyed good relations with both DMK and AIADMK in the past, but S Tel had moved court in 2008 against the DoT cut-off date for granting telecom licences. Company officials could not be contacted for a comment on the issue.

Replying to a Parliament question on 2G and 3G licences on Monday, minister of state for communications Gurudas Kamat said S Tel had filed a writ petition in the Delhi High Court in 2008 for quashing the DoT decision to issue letter of intent to all the eligible applicants who applied up to September 25, 2007, for grant of mobile licences.

S Tel had alleged that DoT had advanced the cut-off date of October 1, 2007, to September 25, 2007.

Although DoT was accused of bias to give preference to a few telcos, the Department has denied any wrongdoing. Meanwhile, the legal battle between the government and STel continues.
S Tel has licences for seven circles in the country, but only three (Himachal, Bihar and Orissa) are operational.

The company had got the DoT permission for starting services as recently as December 2009, and the telco was told to shut operations over security reasons without assigning any specific reasons.

S Tel wants to hike its FDI to 49% from 42.7% now.

Last week, an S Tel spokesperson had confirmed that the company had received the DoT letter ordering closure of service in three circles.

“We are surprised that after giving us the permission through letters dated 11 December, 2009 and 21 December 2009, why we should receive this letter today,” he said.

He added that the letter mentions national security concerns without any details or specifics.

“We are trying to ascertain the same for any supportive action from our side. As far as we know, we have followed the process and have obtained all necessary approvals and permissions.”