India cancels satellite spectrum deal after controversy

The government was criticized for agreeing to lease spectrum without an auction

India has decided to annul a controversial agreement to lease satellite spectrum to a private company, claiming that it needs the S-band spectrum for national uses including defense.

A Cabinet Committee on Security decided to annul the 2005 agreement between Antrix, the commercial arm of the Indian Space Research Organization (ISRO) and Devas Multimedia, India’s law minister, Veerappa Moily told reporters at a televised briefing in Delhi on Thursday.

The annulment is being done under the provisions of the agreement, Moily said. He did not explain why ISRO, an agency under the country’s department of space, which reports to the office of the Prime Minister, had entered into the agreement in the first place.

Devas, which has Deutsche Telekom as an investor, was not immediately available for comment.

The company said in a statement on Wednesday that it expected the government to fulfill all its obligations under the agreement and will take "strong, including legal, steps" to protect the company’s rights and interests.

Moily said that if Devas were to go to court, it would not succeed.

After media reports and opposition politicians earlier this month questioned the proposed leasing of satellite spectrum to Devas without an auction, the Indian government said that the agreement with Devas was already under review from December, 2009. The Comptroller and Auditor General of India (CAG) is also investigating the deal, and has asked the government why the agreement was finalized without competitive bidding, according to reports.

Similar questions were raised in November by the CAG about the Department of Telecommunications' decision to allot 2G spectrum to mobile operators on a "first-come, first-served" basis. The telecommunications department allegedly favored some private operators by not following proper procedures, the CAG said. India’s Central Bureau of Investigation has arrested a number of persons including the country’s former telecom minister, A. Raja, in connection with this controversy.

Devas, a startup in Bangalore, was founded in 2004 to set up a national satellite system for delivering applications for rural development, e-governance, emergency communications, remote connectivity and strategic services, according to the company's website.

The Department of Space was authorized in 2000 to enter directly into commercial agreements with non-government users for spare capacity on its satellites, after meeting the requirement of government agencies. Private Indian companies with a foreign equity less than 74 percent were allowed to establish satellite systems, and the department could contract to build capacity on its satellites that could be used to provide spectrum commercially to private companies.

Government officials said earlier this month that the Department of Space had begun a review of the agreement between Antrix and Devas in December, 2009, and recommended that it be annulled in July, 2010.

The contract had not yet been terminated because it was a complex process, K. Radhakrishnan, secretary, Department of Space, told reporters at a briefing earlier this month.

Devas said earlier this month that it had proceeded with the project after obtaining the required consents and approvals from government agencies including the Space Commission and the Union Cabinet, and the same was confirmed to it by Antrix in February, 2006.

Devas also received approvals for foreign direct investment from India’s Foreign Investment Promotion Board and is in full compliance with government regulations, the company said.

Having fulfilled all its obligations with regard to the 2005 agreement, Devas said it now awaits the delivery of the contracted space segment capacity, which has been delayed by more than two years.

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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