Can 2G scam hit telecom investment?

The scandal and controversy rocking the country over the allocation of 2G spectrum to new telecom operators during the tenure of communications minister A Raja and other related developments are said to be casting a shadow on fresh investments in telecom companies, some industry officials say. Manoj Gairola reports. Why this Raja lost his throne

The scandal and controversy rocking the country over the allocation of 2G spectrum to new telecom operators during the tenure of communications minister A Raja and other related developments are said to be casting a shadow on fresh investments in telecom companies, some industry officials say.

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Apart from the minister, who resigned on Sunday, being investigated on irregularities in the pricing of spectrum, inquiries by the enforcement directorate that probes foreign exchange law violations and suggestions of attachment of assets of new licence holders by income-tax authorities are also factors in altering the business mood.

Three telecom operators — Reliance Comm (entering GSM services), Etisalat DB (formerly Swan) and Videocon (formerly Datacom) — are keenly seeking foreign investment in their companies on the back of aggressive expansion. All of them benefited from Raja’s spectrum policy.

“There is already negative sentiment in the telecom sector due to hyper competition,” said a senior official at one of the new operators, who asked not to be identified.

“Both new and old operators are finding going difficult. Investors no longer find telecom sector lucrative. Now, the allegations of corruption will certainly keep investors away.”

However, Shahid Balwa, original promoter of Etisalat DB Telecom (formerly Swan), said Raja’s ouster and investigations will not hit investment.

“We have not done anything wrong and there is no question of investors getting jittery on account of this,” said Balwa.

Etisalat already holds 45% equity in Etisalat DB Telecom Pvt Ltd, which is a telecom service provider in India. Dynamix Balwas Group is the other large equity holder in the company.

VN Dhoot, promoter of Videocon (formerly Datacom) declined to comment.