Airtel got undue gain of Rs 499 cr from Chennai-TN merger: CAG

The CAG today said the Department of Telecom (DoT) allowing Bharti Airtel to merge Chennai telecom circle with Tamil Nadu in a haste manner in 2005 resulted in undue gains of Rs 499 crore to the company.
"Merger of Chennai Metro and Tamil Nadu telecom circles without any cost benefit analysis of the proposal in 2005 for the CMTS/UAS (full fledge telecom operators) licence resulted in undue benefits to the select telecom operators," the Comptroller and Auditor General (CAG) said in a report today.
The order issued in September 2005 allowed merger of licences and the period of permits was allowed to be fixed as per the date of licence among the two having longer validity.

"The issue of extension of the licence was neither examined nor proposed in the note put up for approval of the competent authority on August 12, 2005 by the officials of DoT but later on included in the office order issued on September 15, 2005," the CAG said.
The CAG said the cost benefit analysis of the proposal for extension of effective date of licence period due to merger of licences had not been done though decision and this had bearing on government revenues due to extension of effective date of licence.
The auditor said "the same was effected without levying any additional fee. This resulted in undue benefit to M/s Bharti Airtel to the tune of Rs 499.35 crore whose UAS licence for Chennai SA was extended from November 2014 to September 2021."

It added that service area merger order stipulated that licence fee of the merged Tamil Nadu service area would be 10 per cent of adjusted gross revenue, which is revenue earned from telecom service only.

However, for the licencees who were paying licence fee at the rate 8 per cent in TN service area, the licence fee was fixed to 9 per cent instead of 10 per cent for the period from October 1, 2005 to March 31, 2008.
"The financial implication due to this reduction of licence fee was calculated by value added service wing of DoT as Rs 3-5 crore annually, but details of which were not available on record," the CAG said.

In the case of Aircel limited (TN SA) and RPG Cellular Services (now Aircel-Chennai SA), their spectrum holding at the time of issue of order was 9.8 MHz and 6.2 Mhz respectively, and they were falling under different slabs prescribed for SUC.
However, "the order did not prescribe the SUC percentage payable by them in case of merger," CAG said.
The auditor said that the merger was carried out only in state of Tamil Nadu to remove "so-called anomaly" ignoring the subscribers of other three major states -- Maharashtra, Uttar Pradesh and West Bengal.
"As a result, the subscribers of these three states continued to be denied the benefits of merger. There was nothing on the file to show as to why the proposal for merger of Chennai Metro and TN SAs only was being put up," the CAG said.