India Investigators File Charges Against Bharti Airtel, Vodafone India
12/21/2012| 07:08am US/Eastern
--Criminal charges filed in case related to alleged corruption in 2002 bandwidth allocation
--Bharti Airtel, Vodafone India, former bureaucrat charged with conspiracy, misconduct
--Investigators allege corruption caused the government a loss of about 8.46 billion rupees
(Adds details of charges and background, updates share price)
By R. Jai Krishna
NEW DELHI--Indian investigators Friday filed criminal charges against the country's two largest telecom companies -- Bharti Airtel Ltd. (532454.BY) and Vodafone Group PLC's (>> Vodafone Group plc) local unit -- for alleged corruption in the allocation of bandwidth in 2002.
Bharti Airtel and Vodafone India Ltd. have been charged with criminal conspiracy and criminal misconduct, according to court documents filed by the Central Bureau of Investigation.
While Vodafone wasn't in India in 2002, its local unit -- which the U.K-based mobile communications giant bought in 2007 -- was allegedly involved in the improper deals, according to the CBI.
Both Bharti and Vodafone could face penalties running into the millions of dollars. If any executives are found guilty, they could be jailed for up to seven years.
Spokesmen for Bharti and Vodafone India declined to comment.
Bharti Airtel shares fell on the news, closing 3.1% lower at 307.15 rupees ($5.57) in a Bombay Stock Exchange market down 1.1%.
The charges filed by the CBI Friday are separate from another telecom case -- referred to as the 2G Scam -- related to former Telecom Minister Andimuthu Raja, and 16 others. The CBI alleges that they rigged the granting of telecom licenses in 2008 for second generation telecom services.
In the 2G case, the CBI said Mr. Raja and his cronies favoured a few companies by handing out telecom licenses, which reportedly caused a potential revenue loss of $7 billion to the government.
It led to Mr. Raja, several corporate executives and officials being sent to jail for a while in 2011. They are now out on bail, and the case is being tried. Also, the Supreme Court ordered the cancellation of 122 licenses which were issued to several companies in 2008, when the current Congress party-led coalition was in office.
The case hurt India's image as an investment destination. The telecom sector had been a showpiece of India's growth story and several foreign companies have invested billions in the industry.
The new charges filed Friday said Shyamal Ghosh, a former federal telecom secretary, conspired with then-Telecom Minister Pramod Mahajan, Bharti Airtel and the now units of Vodafone and caused the government a loss of about 8.46 billion rupees ($153 million).
The CBI accused the bureaucrat of showing "undue favor" to the telecom companies by charging them only 1% of adjusted gross revenue where 2% should have been charged for the allocation of extra spectrum beyond 6.2 megahertz and up to 10 MHz.
A local court will take up the charges against the companies and the bureaucrat on Jan. 14.
Bharti as well as two units of Hutchison-Essar Ltd. -- a joint venture between Hong Kong's Hutchison Whampoa Ltd. and India's Essar Group -- received additional spectrum during that period.
In 2007, the Vodafone Group bought out Hutchison Whampoa's stake in Hutchison-Essar, renaming it Vodafone-Essar Ltd. Later, Vodafone bought the Essar Group's stake and named the company Vodafone India Ltd.
At the time of the alleged offences, the Bharatiya Janata Party was in power and Mr. Mahajan, who died in 2006, was telecom minister.
A BJP spokesman didn't respond immediately to a request for comment, while Mr. Shyamal Ghosh declined to comment.
-Rumman Ahmed in Bangalore contributed to this article.
Write to R. Jai Krishna at firstname.lastname@example.org