India’s telecom minister, Andimuthu Raja, has resigned over accusations that he handed out telecom licences at reduced prices. Raja’s exit was prompted by a report by the public auditor, which found that the auction of the second generation (2G) wireless spectrum had resulted in losses of Rs1,760 billion (US$39 billion) for the treasury. Raja reportedly based the spectrum allocation on 2001 prices and unlawfully awarded licences on a first-come, first-served basis, rather than through an auction process.
This controversy has created anxieties for both service providers and their customers, who may be forced to move to new operators. Asim Abbas, a partner at Khaitan & Co told India Business Law Journal that there is “no provision in the UASL [Unified Access Service Licence] agreement on the migration of subscribers in case of termination”. While subscribers will have to migrate to other telecom operators if their current services are terminated, Abbas points out that such migration could be complicated because regulations demand that “both the ‘donor operator’ and the ‘recipient operator’ need to have a valid UASL”.
An investigation being demanded by India’s main opposition party, the Bharatiya Janata Party, may be bad news for some service providers who may have their licences revoked. The Telecom Regulatory Authority of India has asked the government to withdraw a number of the licences awarded in 2008.
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Companies that may be affected include United Arab Emirates-based Etisalat (which purchased a 45% stake in Swan Telecom in 2009); Uninor, a joint venture between Norweigan telecom company Telenor and Unitech Wireless; and Sistema-Shyam, a joint venture between Russian telecom operator Sistema and the Shyam group in India.
Raja is a member of the Dravida Munnetra Kazhagam (DMK) party – one of the largest supporting parties in the Congress-led coalition government. Its support is vital for the government’s majority. While Raja claims he is innocent, he was quoted by The Press Trust of India as saying: “In order to avoid embarrassment to the government and maintain peace and harmony in parliament, my leader [DMK chief M Karunanidhi] has advised me to resign.”
The government has temporarily handed the role of telecom minister to Kapil Sibal, who is also the human resource development minister. In addition to this role, Sibal has been given responsibility for heading the Ministry of Science and Technology, following the departure of Prithviraj Chavan, who has been appointed as the chief minister of Maharashtra.
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