The Comptroller and Auditor General of India (CAG) report on the issue of licences and allocation of 2G spectrum states that nine operators including Bharti Airtel, Idea Cellular, Reliance Communications (RCOM) and Mahanagar Telephone Nigam Limited (MTNL) were allotted spectrum beyond the upper limit set in the licence agreement.
It added that the government can earn additional revenue of up to Rs 370 billion if the companies are asked to pay for the additional spectrum being held by them. The report said that while the Department of Telecommunications (DoT), on one hand, was not processing pending applications for licence due to non-availability of spectrum, it was, nevertheless, allotting spectrum to existing operators beyond the contracted limit without any upfront charges being imposed or without determination of market price of spectrum.
The report further says the value of spectrum held by 13 operators for 51 circles based on the 2001 rates came to Rs 25.61 billion. The value of additional spectrum held is expected to be in the range of Rs 120-Rs 370 billion.
Moreover, more than 70 per cent of the 122 2G licences issued by former Minister of Communications and IT A. Raja in 2008 were to companies that did not meet the basic eligibility criteria. The CAG report said as many as 85 licences out of the 122 new licences issued to 13 companies in 2008 were granted to those companies which did not satisfy the eligibility conditions prescribed by the DoT. All 85 licences were given to companies which did not have the stipulated paid-up capital at the time of application.
The report said twelve companies that collectively won 85 licences, including Unitech, Loop Telecom, Videocon and S Tel, would not have obtained licences had DoT followed the specified set of eligibility conditions. These include mentioning of telecom business in the company?s Memorandum of Association (MoA) and Articles of Association, minimum paid-up capital and not holding more than 10 per cent shareholding in another licence holder in the same area. Companies that did not meet these minimum requirements were allowed to re-submit the application after due compliance.
CAG stated that while 72 licences were given to companies which did not have the stipulated paid-up capital at the time of application, 27 licences were issued to companies who failed to satisfy conditions of main object clause in their MoA and the share holding pattern declared by one company did not meet the DoT stipulations.
Another area of contention, it stated, was that Swan Telecom, which applied for licences in 13 areas in the application filed in March 2007, violated shareholding pattern disclosing Reliance Telecom as holding 9.81 per cent equity in the company in the form of 10.79 million shares. Not only was Reliance Telecom operating in all service areas, it also held 9.9 million preference shares.
Swan?s application was not disqualified but allowed to resubmit a revised shareholding pattern in December 2007, a month before the licences were issued and nine months after it filed the initial application. Thus, the CAG has said Swan Telecom appeared to act as a “front company” on behalf of Reliance Telecom.
