In a swift move to clean up the telecom sector, new Communications Minister Kapil Sibal on Monday announced that the department of telecom (DoT) would slap showcause notices on the holders of 85 licences for violation of eligibility norms.
“We believe that some of the companies might have suppressed facts, might have got undue advantage in accessing licences,” the minister said.
This comes close on the heels of a comptroller & auditor general (CAG) report tabled a few weeks ago, which pointed out that holders of at least 85 of the 122 licences issued in 2008 have not met DoT-prescribed preconditions and therefore their licences should be cancelled.
Sibal said DoT will also issue showcause notices to holders of 119 licences for failing to meet stipulated rollout obligations. Only a few days earlier, regulator Trai recommended cancelling 69 of the 127 licences issued from 2006 because of rollout lapses.
Sibal, who was addressing a press conference in Delhi on Monday, said errant operators would be given 60 days to reply the notice. DoT will then decide whether to cancel their licences or impose a penalty. He added that the decision to issue showcause notices was taken after DoT had sought legal opinion on both the CAG and Trai reports.
DoT’s tough stance virtually puts in the dock nine licensees that have been named in both reports. They include Unitech Wireless (Uninor), Datacom (now Videocon), Loop Telecom, Etisalat DB (originally Swan Telecom), S-Tel and Allianz Infratech. Sistema Shyam and Aircel have only been pulled up for rollout obligation infringements.
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Sibal also announced that DoT has decided to ask the department of corporate affairs to probe into whether Swan Telecom was a “front” company for Reliance Communications (RCom), which had an over 10 per cent stake in Swan and should not have been given a licence under existing policy, according to the CAG report. A telco cannot hold more than 10 per cent in a competing firm in the same circle.
While welcoming an independent examination by the corporate affairs department, an RCom spokesperson reacted to Sibal’s announcement by saying, “The doubts raised by CAG in this regard, without even seeking RCom’s explanations, are entirely incorrect and unjustified. RCom was fully compliant at all times with all applicable laws, including inter alia cross-holding, and there is no question of Swan Telecom being a front company. RCom group had also ceased to be a 9.9 per cent shareholder of Swan much prior to a licence being granted to that company.”
In its report, CAG had pointed out that companies like Unitech, Etisalat DB, S-Tel and Loop Telecom did not meet eligibility criteria on authorised share capital and had misrepresented various facts. Unitech and Loop were also pulled up for applying for a licence before their revised articles of association to include telecom had been cleared by the registrar of companies.
“Many of the firms, while applying for new licences, went through a self-certification process. This has serious implications on transparency of process. It allows companies to get ahead of the queue on the basis of first-come first-served, in that they did not register first with the registrar of companies,” Sibal said.
Trai, on the other hand, had recommended the cancellation of 38 licences because operators failed to comply with DoT-stipulated rollout norms. Licensees are required to roll out services in 90 per cent of the area in metros and 10 per cent in district headquarters within 12 months of receiving spectrum. The regulator also pulled up 31 other licensees for poor coverage and inadequate cell towers.
CAG had also said that DoT could not recover Rs 679 crore as penalty, or ‘liquidated damages’, from six new operators for missing the rollout schedule under the licence agreement.
Asked about the loss to the exchequer by allotting spectrum at 2001 prices -- as pointed out by CAG -- the minister said: “This is something (that) the ministry will decide and we will apply our mind individually to each case.”
Sibal also said, “We are not averse to the Supreme Court monitoring investigations into irregularities in 2G spectrum allocation.”