“Telecom second most corruption-prone sector” – in India

While reading more then usual news items from India – as you can see in three previous of my texts – always with an interest to compare developments in Cambodia with developments in other countries – I had found the following reference to the telecommunications sector in India, according to a 14 March 2011 report from the Press Trust of India:

Now, on 21 April 2011, also The Cambodia Daily brought half a page, from Reuters, which perfectly fits as further orientation: Indian Court Rejects Bail Pleas in High-Profile Telecom Trial. But first back to the reports from March:

Telecommunications, under limelight in recent months due to the 2G scam, has been voted as the second most corruption-prone sector in India after real estate and construction, according to a survey by [the global network of the professional firm providing audit, advisory, and tax services] KPMG.

The survey, covering corporate India, also found that a huge majority of corporates believe India can surpass an annual growth rate of over 9% if corruption is controlled, while self-critically admitting that the private sector is greatly responsible for bribery and nepotism.

The survey is based on responses from 100 Indian and multi-national corporations operating in the country in diverse areas, including transportation and logistics, aviation, oil and gas, consumer goods, financial services, auto, and chemicals…

While praising certain rules like the Right to Information Act (RTI), majority of the corporate houses surveyed, however, believe the level of corruption in the country will remain the same irrespective of legislation.

This negative opinion is the result of certain events which happened during the last three or four years, in relation to selling licenses for special frequency ranges. As the development of electronic communications – for mobile phones and for the Internet – is experience the same strong expansion in India as in many other countries, new frequency allocations are a highly sought for commodity. In spite of existing regulations, the frequencies were obviously sold at very low prices, way beyond what could be expected under free market conditions.

Companies were charged licenses for spectrum at charges estimated in year 2001 now in 2008. These fees were far below the value for the transformed market of telecommunication at current period.

Many speculations about the transparency and fairness in the process of issuing license were raised, which was later proved through a report by Comptroller and Auditor general of India.

Andimuthu Raja, now ex-minister of telecommunication and information technology, allegedly misused all his power and position to gain monetary advantages by putting laws and policies of government at stake.

According to the report submitted by the comptroller and Auditor General of India, submitted to the President in 2010:

“2G spectrum licenses were issued to private telecommunication corporates at throwaway prices in 2008, on allegedly first come first serve basis earlier internally adopted in Department of Telecommunication for allocation of spectrum, was then extended for issue of new Unified Access Service licenses.

“Arbitrary changes were made by the Department of Telecommunication in the cut off date, which led to cutting off many companies out of competition in the run to obtain license.”

The report revealed that 9 companies which purchased the license collectively paid an amount of Rupees 107,720,000,000 [approx US$2,392 million], while the estimated amount by the comptroller and Auditor General of India was Rupees 1,767,000,000,000 [approx US$39,240 million]. – Source: India Study Channel.

To award telecommunication licensing is obviously big Big Business.

In November 2011, A. Raja, who had, as Minister of Telecommunication, been overseeing the sale of licenses, was criticized and resigned. In February 2011, he and his former personal secretary and some others were arrested, charged with “manipulating the granting of telecommunication licenses and causing a potential loss of government income of US$39 billion.

These arrests became possible because of investigations started by the Auditor General of India.

While these events in India relate to 2G – second-generation – technology licenses in 2008, in Cambodia, several Internet and mobile phone providers offer already third-generation – 3G – communication network services since 2006.

Then, in February 2009, it had been reported that Alcatel-Lucent – a global company with French and US roots – had been selected to deploy, together with Chuan Wei (Cambodia) the first wireless broadband country-wide WiMax network in Cambodia. Chuan Wei is part of the Thai Boon Roong Group, also majority holder of the Intercontinental Hotel in Phnom Penh.

In November of the following year, 2010, it was even reported that the Russian company Alltech Telecom – “a holding company for assets ranging from oil production to real estate” – had signed an agreement with the Cambodian government to build the first 4G – fourth-generation – network in cooperation with a not identified local partner. Being the first in this future growth market is an enormous advantage.

Recently, on 14 April 2011, The Cambodia Daily reported that the Royal Group, which operates among others the Mobitel mobile phone company as well as the Cellcard Mobile Broadband Internet access system, in addition to hotels and television, banking,and insurance, has received the government license to operates a communications satellite, which is to be launched in 2013. Quoting the CEO Kith Meng of the Royal Group, The Cambodia Daily reported:

The company has not chosen a satellite manufacturer or determined the physical location for the satellite’s launch into space, he said, but added that a second satellite could be launched by as early as 2015… He said he did not expect any other Cambodian company to emerge as a competitor… “Another operator just wouldn’t be possible, because the market won’t be there,” he said.

So Khun, Minister of Posts and Telecommunications, said on the sideline of the signing that the government had approved the deal in February and that his Ministry did not plan to issue any more licenses for satellite operators.

The government did not initiate a bidding process for the concession and Royal Blue Skies [the satellite company] will share some of its revenue with the government, but the amount has not been determined, he said.

It is not clear on which legal basis further licenses for competitors have been excluded in the country, which is to work, according to Article 56 of the Constitution – “The Kingdom of Cambodia shall adopt the market economy system” – with competition between different actors on the market. But things have been settled already (though the price has not yet been negotiated). It is quite probable that the first who holds a license for 4G frequencies, of for a satellite frequency license, will have a considerable advantage – even if, at a later stage, competitors might still show up.

As for India, today’s Cambodia Daily reports:

The fallout from the telecom scandal, which may have drained up to US$ 39 billion from from India’s public purse, has seen some of the country’s richest men, seeing as living symbols of India’s growing self-confidence on the world stage, called in for questioning.

“The Central Bureau of Investigation (federal police) has also expressed its apprehension that accused persons may tamper with evidence by trying to win over witnesses and that they may also flee from justice in view of the magnitude of the offense,” Judge O. P. Saini said in a court order yesterday.

“Hence, in my considered opinion, it is not a fit case for bail.”

Flattr this!

Comments are closed.