DoT's reply on fee relief to Telenor unacceptable, says auditor

The auditor said the set-off in favour of Telewings Communications was "irregular, arbitrary and discriminatory"

Norwegian telecom firm Telenor might find itself in fresh trouble, with a government auditor saying the Department of Telecommunications (DoT)’s explanation of the decision to offer fee relaxation to the company “is not acceptable”.

The director-general of audit (post and telecommunications) had earlier questioned the government’s decision to adjust the Rs 1,658-crore entry fee paid by Telenor’s former Indian partner, Unitech Wireless, against the fee the Norwegian firm had to pay for the fresh spectrum it won in November last year.

Following the audit, the DoT had replied the set-off decision was taken by the empowered group of ministers (EGoM) on telecom. But the auditor said the set-off in favour of Telewings Communications (Telenor’s newly formed entity in India) was “irregular, arbitrary and discriminatory”.

According to the auditor, Unitech Group had benefited at every stage to the cost of the government exchequer and under the principle of the law of restitution, Unitech Group was liable to pay compensation to the government. Telenor had also benefited from the illegal actions of Unitech and, hence, was equally responsible for making good the loss suffered by the government, it said in its response to DoT’s reply.

The auditor, in his fresh submission, said the Supreme Court directed the companies that continued operations after February 2, 2012 (the day when the apex court quashed 2G licences including Unitech’s), whether or not they bid in the November 2012 auction, shall pay the reserve price fixed by the government. Thus, Unitech Group is required to pay the reserve price for providing service in 15 telecom circles for the period after February 2, 2012, till they discontinued their service.

Further, if any quashed licensee or the DoT needed to have any clarification on any issue arising out of the SC judgement, they should have gone back to the apex court and sought guidance or review, added the auditor.

It is also noted that the EGoM’s set-off decision was based on a note prepared and submitted by the DoT, and all facts of the case were not brought out to the notice of the ministerial panel. Even the revenue of Rs 3,859 crore earned by Unitech from the quashed licences or spectrum was not considered by the DoT while preparing the note for the EGoM.

“Neither was any consultation done with the Telecom Regulatory Authority of India, nor was the approval of the Telecom Commission sought before taking the decision,” the audit report noted.

In its reply, the DoT had stated the EGoM, keeping in view the facts and details of the ownership structure (of Uninor), decided in favour of the set-off. The set-off allowed was not in the nature of refund as it was allowed only to the companies that participated and were successful in the November 2012 auction, said the DoT. It also pointed out that these firms were pressing for compensation under bilateral investment agreements.

Telenor holds a 49 per cent stake in Telewings and has recently received approval of the Foreign Investment Promotion Board for raising its stake to 74 per cent. In the earlier joint venture with Unitech group, Telenor had 67.25 per cent stake holding.

Uninor, the erstwhile joint venture between Telenor and Unitech, had paid Rs 1,658 crore for its previous mobile permits that were revoked by the Supreme Court when it cancelled 122 controversial licences in February 2012. Twenty-two among them were Uninor's.

In the November 2012 auction, Telenor won six licences through Telewings, which was required to pay Rs 4,018 crore in installments. "They made 33 per cent upfront payment of Rs 1,326 crore and made a representation, requesting DoT to set off the entry fee of Rs 1,658 crore paid by the eight companies of Uninor," the audit report had noted.