India Issuing Notices to 2G Licensees After Scam Report

The Indian government has decided to issue show-cause notices to 85 mobile phone licensees that may have suppressed information while applying for 2G licenses that were awarded in 2008.

Licensees have 60 days to respond to the notices, which could lead to cancellation of licenses, Kapil Sibal, the country's minister of communications, told reporters in Delhi on Monday at a press conference that was televised by some Indian channels.

The move comes in the wake of the country's Comptroller and Auditor General of India (CAG) presenting a report this month in India's Parliament alleging that irregular allocations of 2G licenses and spectrum in 2008 to some Indian operators may have cost the country about US$39 billion.

The report said that the minister of communications and IT at the time, A. Raja, had favored some companies in the award of licenses. Raja resigned before the report was presented, after leaks of it were published in some newspapers in India. Sibal replaced Raja.

The CAG report "is an opinion" that will have to be verified by the government, Sibal said on Monday.

The CAG report stated that verification of the files of India's Department of Telecommunications (DOT) and public documents accessed from the Ministry of Corporate Affairs revealed that 85 of 122 new licenses issued to 13 companies in 2008 were granted to companies that did not satisfy eligibility conditions prescribed by the DOT.

All 85 licenses were given to companies that did not have the stipulated paid-up capital at the time of application, CAG said in the report. Also, 45 of those 85 licenses were issued to companies that failed to satisfy conditions in the main object clause in their Memorandum of Association, CAG added.

Some of the licensees later sold stakes in their companies to foreign telecommunications service providers. The entities that invested should have made sure that the law was complied with, Sibal said.

The country's telecom regulator, Telecommunications Regulatory Authority of India, recommended earlier this month that about 62 licenses for 2G services should be cancelled, as the companies involved met only partially or not at all their service roll out obligations in some service areas.

CAG said in its report that of 122 licenses issued in 2008, 85 licenses were awarded to six new licensees that had not met their service roll out obligations.

Notices will also be issued to the licensees that have failed to meet their service roll out obligations so far, Sibal said. There are overall 119 instances where roll out obligations have not been met, and these include licenses issued in 2006. The penalty in this case could be either damages or cancellation of licenses, he added.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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