Legality of Indian 2G licences called into question

A fresh licensing dispute has arisen in India – but rather than the newer 3G, it concerns the country’s 2008 issue of 2G licences. Over 75 of the 120 2G licences issued 2 years ago have been claimed by India’s Comptroller and Auditor General to be illegal on the grounds that they violate ‘several’ of the Department of Telecoms’ guidelines, which were laid out in December 2005.

Many companies were reportedly awarded licences despite failing to meet basic criteria set out by the guidelines; following on from this, there are claims that company credentials were not investigated before licences were awarded. Certain companies, including several real estate firms, have had the legality of their involvement in the process called into question.

The Comptroller has informed the DoT that several of the licences may be illegal, but there is no implication that the DoT itself was complicit in any criminal activity, with the regulator claiming that it has done nothing wrong, and vowing to press charges against any companies that supplied it with misleading information.

Investigations will reportedly look at several of the operators (among them Loop, Allianz Infra, Uninor, Datacom and Swan), as well as attempting to establish whether a slew of allegations relating to the original auctions have any foundation. There are allegations that the process was in violation of money laundering and foreign exchange regulations, and that the selling prices did not take increasing spectrum value into account. In addition, the role of India’s Telecoms Minister, A Raja, is being investigated.

Many of the 2G startups who gained licences during these auctions are now struggling to turn a profit in India’s fiercely competitive market. The government is looking to alleviate the situation, and may allow firms to return their licences and refund their initial fee.

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