India cellcos could lose licenses

Dylan Bushell-Embling
19 Nov 2010

The fallout from India's 2G allocation scandal continues, with shares in Reliance Communications taking a hit while regulator Trai calls for nearly half of the allotted licenses to be revoked.

RCom stock on the Bombay exchange slumped 4.88% to 153.90 rupees, despite the operator's denial that it was involved.

State auditor CAG's report into the 2008 allocation of 122 2G licenses, sent to parliament this week, alleged that RCom owned a holding in Swan Telecom at the time. Regulation restricts companies from holding more than 10% of two 2G license holders within a single circle.

RCom said it had in December 2007 divested its entire stake in Swan - which by that time was 9.9% - one month before Swan's license application was accepted. The company said it would share information with CAG to prove it is in full compliance with all laws and regulations.

But according to the CAG report, RCom held a 10.71% stake at the time of Swan's initial application in March. While the stake had been divested at the time of acceptance, Swan's bid was given seniority position based on the date of the application in the first-come-first-served allocation.

Indian telecom regulator Trai has also reportedly recommended the cancellation of 62 of the licenses issued - including those held by Uninor and Sistema Shyam - because of concession holders' failure to meet network coverage obligations.

More than half of the licensees have yet to roll out 2G services, while 28 had launched but did not meet the minimum criteria on network reach, sources within the department told the Economic Times.

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