Indian telecom department officials face charges

India's Central Bureau of Investigation (CBI) said Thursday that it is pursuing criminal charges against some officials of the country's Department of Telecommunications (DOT), private sector companies and some individuals, in connection with alleged irregularities related to the award of telecommunications licenses by the DOT.

The CBI did not name the individuals or companies that it plans to charge under the country's Prevention of Corruption Act.

The CBI conducted searches Thursday to collect incriminating documents in the Wireless Planning Cell (WPC) and in the office of Deputy Director General for Access Services of the DOT, it said in a statement.

The award of licenses for mobile 2G telephony and related services was criticized by the local telecom regulator, Telecom Regulatory Authority of India (TRAI), which recommended competitive bidding. The DOT instead decided that licenses would be allocated on a "first-come-first-serve" basis at low prices that were current in 2001, CBI said.

TRAI had also recommended in 2007 that there should not be a ceiling on the number of service providers in a service area. DOT went along with the recommendation but in October 2007 it stopped accepting applications, citing a surge in demand for the licenses.

In a letter to TRAI in July this year, DOT asked the regulator to review its decision that there shouldn't be a cap on the number of service providers in a service area. DOT said that the requirement of creating competition in the market had been met, and that it would find it difficult to allocate spectrum to all the applicants.

India awarded 281 telecom licenses as of June 30 this year, but there is still a waiting list of 343 applicants for 22 service areas in the country, according to the letter from the DOT. This backlog exists despite the DOT stopping acceptance of license applications in October 2007.

The CBI said that by putting a cap on the number of licenses, there had been a criminal conspiracy between certain officials of the DOT and some private companies and individuals to award licenses to select companies.

There is worry in government and industry circles that investors may be bidding for telecom licenses to make a quick buck by subsequently selling stakes in their telecom companies at huge valuations to large Indian and foreign service providers, said informed sources.

Among the companies waiting for a license are some construction companies that have found mobile telecom services a new diversification opportunity.

In the case of 3G licenses, the government has taken the view that licenses and spectrum should be auctioned. This auction has been postponed since January.

The IDG News Service is a Network World affiliate.