Home / / Etisalat's Indian venture under investigation

Etisalat's Indian venture under investigation

India's Central Vigilance Commission looking into the legalities of Swan Telecom’s purchase of mobile licence

India’s Central Vigilance Commission is investigating the legalities behind Swan Telecom’s licence.
India’s Central Vigilance Commission is investigating the legalities behind Swan Telecom’s licence.

Etisalat's joint venture in India, Etisalat BD is under investigation by the country’s anti-corruption department over questions around how the company acquired its 2G telecoms licence.

Etisalat BD, which was formed by the UAE operator’s acquisition of a 45% stake in Swan Telecom for $900 million in September last year, is facing questions around irregularities in the award of its licence, which took place before Etisalat invested in Swan.

The Polit Bureau of the Communist Party of India (Marxist) called for an enquiry into how India’s Department of Telecommunications (DoT) handled the awarding of 2G mobile licences, over concerns that licences were awarded on a 'first come, first served basis', and that licences were sold too cheaply.

“For the release of the fourth licence and the spectrum required, the communications ministry adopted a completely inexplicable principle of `first come, first served’ for allocating the licence as well as a licence fee based on 2001 price. These 2G licences were priced at 2001 levels allegedly to keep the costs low for the consumers. However, this was not ensured through the licence terms and conditions. As a result, the parties who had secured these licences have sold or are selling their shares at huge profits,” the official statement read.

It alleges that Swan Telecom bought a licence for a ‘paltry’ Rs. 1,537 crore ($322.7m) and then sold 45% of its stake to Etisalat for $900 million, effectively taking its book value to $2 billion without “putting up any infrastructure, let alone starting operations".

It also questions Unitech Wireless’ 60% stake sale to Norway’s Telenor on similar charges. India’s anti-corruption watchdogs - the Central Vigilance Commission (CVC) – are presently investigating the matter, and addressing allegations into whether Swan Telecom was being controlled by Reliance Communications at the time it acquired its licence in January 2008.

The law clearly states that a single company cannot own more than 10% in two firms that have telecommunications licences, which now taints the awarding of Swan’s licence, and the subsequent Etisalat sale.

"CVC's technical examiner is looking into the files of Swan," Central Vigilance Commissioner Pratyush Sinha told Hindustan Times recently. "We found that the allocation of 2G spectrum to private companies, including Swan, on a 'first-come-first-serve' basis was not transparent and that DoT was selective in following TRAI (Telecommunications Regulatory Authority of India) recommendations."