Unitech, Swan Named in India\'s Telecom Probe

NEW DELHI—

India\'s Central Bureau of Investigation named two mobile-phone companies as beneficiaries of a so-called rigged spectrum sale in 2008 that it said cost taxpayers more than $4.8 billion in potential revenue, offering the first details on which firms it is pursuing in the alleged scandal.

India\'s former telecom minister A. Raja in front of the offices of New Delhi\'s Central Bureau of Investigation in New Delhi, Dec. 24, 2010.

.The agency\'s disclosures that it has targeted Swan Telecom Pvt.—now called Etisalat DB Telecom Pvt.—and Unitech Ltd., among other unnamed companies, came in a submission to an Indian court, while seeking the right to detain Mr. Raja and two of his former aides. The court remanded Mr. Raja, his former personal secretary R.K. Chandolia, and Siddartha Behura, the former telecom secretary, to the CBI\'s custody for five days starting Wednesday, when they were arrested.



The CBI\'s estimated potential revenue loss to India was however far lower than the potential loss of the nearly $40 billion estimated by the Comptroller and Auditor General, a government auditing agency, late last year.



The lower estimate could give a boost to the beleaguered federal government, which has been reeling from the revelations contained in the auditor\'s report.



The government separately has been trying to play down the extent of the irregularities in the allotment process and has claimed the auditor\'s figures were \"flawed\" and \"erroneous.\"



The government, led by the ruling Congress party, has been trying to clean up its image after the graft-tainted Commonwealth Games and allegations that apartments in a Mumbai housing project intended for war heroes and widows went to politicians, bureaucrats and their relatives. Both incidents blew up late last year and claimed the jobs of two high-profile Congress leaders.



The corruption cases threaten to erode the Congress party\'s mass appeal. The party can ill afford that with important state elections looming in the next few months in India\'s states of West Bengal and Tamil Nadu.



In its submission in court, the CBI lawyer sought custody of Mr. Raja, Mr. Chandolia and Mr. Behura for a joint interrogation, accusing them of showing \"undue favoritism.\"



Lawyers for all three denied any wrong doing by their clients. Mr. Behura\'s lawyer said his client had taken over when all decisions regarding the grant of licenses had already been taken. Mr. Chandolia\'s lawyer said his client was a \"mere personal secretary\" and had no powers. Mr. Behura was in office from January 2008 to September 2009.



The agency, which arrested the three men on Wednesday afternoon, needed to produce them in court within 24 hours and seek their the court\'s approval for custody. The five-day period of custody starts on the day of the arrest. The CBI, which had filed charges against unknown telecom department officials, individuals and companies late last year, now has to file specific charges against the three people in 60 days. It also has to submit a report on progress on the case to the Supreme Court on Feb. 10.



Officials at Etisalat and Mumbai-based Dynamix Balwas Group, an original founder of Swan Telecom, couldn\'t be reached for immediate comments.



In a statement, Unitech denied receiving any favors. It said it complied with all guidelines while obtaining the telecom licenses at a cost set by the government.



In an emailed statement, Etisalat DB said it isn\'t party to the current matter before the court, and so declined to comment. However, the company said it will provide \"any necessary and possible assistance\" to the government authorities.



The CBI has been scrutinizing the government\'s 2008 sale of mobile phone frequencies, a process that critics say favored some companies over others, pricing bandwidth far below its market value. The allegations led to the resignation of Mr. Raja as telecom minister in November. Mr. Raja had been appointed telecom minister in May 2007. It was during his terms that the controversial 2008 allocation of spectrum took place. CBI has now widened its probe to cover spectrum grants since 2001.



The CBI said that the allocations of licenses in January 2008 to Swan and Unitech, cost the government an estimated 70 billion rupees ($1.53 billion) in potential revenue. Swan later sold a 45% stake to Emirates Telecommunications Corp. and Unitech later sold a majority stake to Norway\'s Telenor AS. Both Unitech and Swan had issued fresh shares to their partner companies.



Unitech and Telenor run their joint India mobile business under the Uninor brand name. A total of 122 licenses were given out in January 2008.



Telenor said it isn\'t involved of the case. \"We would like to reiterate that these are investigations are into matters that happened before Telenor Group entered into India,\" the company said in an emailed statement. Telenor\'s investments were \"in reliance of a bonafide license awarded by the government at the time\" and the company believes that the license was awarded in accordance with the guidelines, it added. The company declined to comment further.



The CBI added that while Swan got licenses in 13 service areas for 15.37 billion rupees, it later sold that stake for about 42 billion rupees. Unitech got licenses in all 22 circles for 16.58 billion rupees, but sold the stake to Telenor for about 61 billion rupees, showing how the licenses granted were undervalued.



Unitech said all the payments it received from Telenor had been cleared, and have gone into Uninor.


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