MUMBAI: India’s fiercely competitive mobile phone industry has been beset by a fresh wave of regulatory uncertainty stemming from a possible probe into 2G spectrum that a government audit says was awarded too cheaply.
The scandal over spectrum allocation resulted in the sacking of Telecoms Minister Andimuthu Raja at the weekend.
Shares in mobile operator Reliance Communications and Unitech fell as much as 10 percent on Thursday after media reports said that the allocation of spectrum to some operators may face investigation.
Real estate firm Unitech has a telecoms joint venture with Norway’s Telenor.
"There are concerns in the minds of investors that there could be an investigation in how companies like Unitech and Reliance Communications obtained spectrum," said Arun Kejriwal, a strategist with research firm KRIS.
India’s 15-player mobile sector, the world’s fastest-growing, has been locked in a margin-crushing price war.
The Comptroller and Auditor General of India said in a recent report that the country may have lost up to $31 billion in revenues, roughly equivalent to the defence budget, in the granting of mobile licenses in 2007/08.
"This department had been receiving innumerable references from Members of Parliament and other sources repeatedly, questioning the allocation process and the price fixed for such allocation," the auditor said in its report.
"The claim in each such reference is that ineligible applicants seem to have been granted licenses and at a price which appeared far below what has been perceived to be the appropriate market price in 2008," it said.
The auditor in its report said that Unitech, a company with no prior experience in the telecoms sector at the time, was allocated spectrum at "a throw away price" by the department of telecommunications.
Officials at Unitech and Reliance Communications could not immediately be reached by Reuters for comment.
Swan Telecom, which has since been bought into by the UAE’s Etisalat, was given a license despite a unit of No 2 telecoms firm Reliance Communications holding over 10 percent of equity, a violation of rules, the auditor’s report said.
Reliance Communications has said the group did not have any shareholding in Swan when licenses were given out.
At 1:10 p.m. (0740 GMT), shares in Reliance Communications were down 7.6 percent at 149.50 rupees and Unitech was trading 7.3 percent lower at 69.90 rupees, while the main Mumbai market was little changed. The Indian markets were closed on Wednesday for a public holiday.
