Home ministry blocks Etisalat DB’s 2G ambitions

Despite being allowed to bring in an investment of $900 million (Rs 4,000 crore), why hasn’t telecom firm Etisalat DB been allowed to bring in an additional foreign investment of Rs 380 crore — less than 10% of its total foreign investment? Gaurav Choudhury probes.

Despite being allowed to bring in an investment of $900 million (Rs 4,000 crore), why hasn’t telecom firm Etisalat DB been allowed to bring in an additional foreign investment of Rs 380 crore — less than 10% of its total foreign investment?

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According to sources, who did not wish to be identified, the reason is four objections by the Ministry of Home Affairs (MHA).

In a note to the Foreign Investment Promotion Board (FIPB) on September 29, 2010, the MHA had pointed out these four issues that needed to be resolved before allowing this investment to come into Etisalat DB, a company that got scarce 2G spectrum at allegedly throwaway prices, according to a Comptroller and Auditor General report.

First, current vice-chairman Shahid Balwa should not be involved in the operations of the company in any capacity.

Second, the MHA raised objections about the commercial relationship between the Dubai-based Etisalat Group and China’s Huawei. The MHA suspects, Huawei has links with China’s People’s Liberation Army — the country’s military organisation of all land, sea, strategic missile and air forces — and has the capacity to manipulate equipment supply.

Fourth, the MHA has also expressed concerns about the telecom surveillance software Etisalat had used in a Blackberry service it had introduced in the UAE and recommended that the company should not be allowed to offer Blackberry services in India.

Despite repeated attempts, an Etisalat DB spokesperson did not respond to emails, phone calls or text messages sent by HT.

In December 2009, Etisalat DB had applied to the FIPB seeking permission to buy a 5.27% stake of the Chennai-based Genex Exim Ventures for Rs 380 crore --- exactly the same price at which Genex had initially bought the stake.

FIPB had then rejected the proposal on grounds of possibility of “round tripping”. Round tripping refers to routing of investments by a resident of one country through another country back to its own country to evade taxes.

In September 2010, Etisalat DB submitted a fresh proposal to for buying out Genex’s stake in the company, over which the MHA responded with the four objections.