Etisalat distances itself from Indian mobile license scam

The company says it invested in the Indian company after second-generation mobile network licenses were allotted

Telecommunications operator Etisalat has distanced itself from an alleged scam in the allocation of second-generation (2G) mobile network licenses in India, after an Indian agency arrested a key executive of its Indian joint venture.

Earlier on Wednesday, a spokesman of the Central Bureau of Investigation (CBI), which is investigating the scam, said it had arrested Shahid Balwa, vice chairman of the joint venture, Etisalat DB Telecom.

The irregular allocation of 2G licenses and spectrum in 2008 to some Indian operators may have cost the country about US$39 billion, the Comptroller and Auditor General of India (CAG) said in a report that was presented in India's Parliament in November. Former communications minister A. Raja and two civil servants were arrested last week.

Balwa is managing director of DB Realty, which founded Swan Telecom and later sold a 45 percent stake to Etisalat. The company was subsequently renamed Etisalat DB Telecom.

DB Realty said in a filing to the Bombay Stock Exchange on Wednesday that Balwa was wrongly implicated in the investigations into the 2G licenses.

The CAG report said that some companies including Swan Telecom had benefited from the irregular allotment of 2G licenses and spectrum in early 2008.

Etisalat said Wednesday that it acquired its stake in December 2008, after Swan had applied for and obtained 15 licenses. Etisalat had no involvement whatsoever in the license application process, and purchased its stake in the company in the belief that the licenses had been validly granted, it said.

The company said that it always operates within the laws of the countries in which it functions, and will cooperate fully with the Indian authorities if approached. The company said it was "here to stay" and deeply committed to India.

The Indian government faced allegations this week of another spectrum scam, this time by Antrix, the commercial arm of Indian Space Research Organization (ISRO), which entered into an agreement in 2005 with a start-up in Bangalore to provide S-band spectrum from Indian satellites.

The CAG is said to have questioned that an agreement was reached over allocation of spectrum without an auction, which was also a question it raised about the 2G licenses by the Department of Telecommunications in 2008.

Officials of the Department of Space said late Tuesday that it had in fact decided to cancel the agreement in July last year, as it was decided that there were other high-priority and strategic requirements for the spectrum. The actual termination of the agreement may take some time, because of the complexity of the procedures involved, they said.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com

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