Indian federal investigators arrested Shahid Balwa, vice chairman of Etisalat DB Telecom India Pvt., widening a probe into the sale of mobile-phone licenses that’s already triggered the detention of a former minister.
The Central Bureau of Investigation arrested Balwa yesterday, the agency’s spokeswoman, Binita Thakur, said in a phone interview today. His arrest comes a week after authorities detained former telecommunications Minister Andimuthu Raja for questioning. Balwa is also the managing director of DB Realty Ltd., a Mumbai-based property developer.
A Mumbai court today remanded Balwa to two days in custody after the agency argued that Raja conspired to favor companies including the then Swan Telecom Ltd., now known as Etisalat DB, and Unitech Ltd. by violating guidelines in the license sale. The bureau, which won approval to quiz the former minister until tomorrow, told a New Delhi court on Feb. 3 that Raja caused a loss of 220 billion rupees ($4.8 billion) to the exchequer.
Investor concerns over corruption, rising inflation and seven interest rate increases in a year have spurred foreign investors to sell $1.1 billion of shares in 2011 and triggered a 14 percent fall in the Bombay Stock Exchange Sensitive Index, the second-worst performance after Egypt. The Sensex climbed 17 percent in 2010, the most among the world’s 10 largest stock markets, as optimism over economic growth and corporate earnings propelled record foreign inflows.
Shares in DB Realty fell as much as 20 percent in Mumbai, and were trading down 9 percent at 124.35 rupees as of 3:11 p.m. Unitech had also slipped 9 percent to 37.4 rupees.
“It seems the CBI is trying to find out the money trail in the spectrum sale,” said N. Bhaskara Rao, chairman of the Centre for Media Studies in New Delhi. “It also indicates the government’s seriousness to uncover telecoms corruption.”
DB Realty said in a statement today that Balwa had been “wrongly implicated” in the spectrum license probe. Neither the company nor Balwa did anything “inappropriate or illegal” and will strongly contest the proceedings, the statement said.
India’s chief auditor said in November second-generation airwaves were sold for an “unbelievably low” $2.7 billion when they may have been worth at least 10 times more. Raja’s personal secretary and an ex-bureaucrat in the telecommunications ministry were also taken into custody by federal investigators last week.
The opposition, led by the Bharatiya Janata Party has stalled parliament, calling for a joint probe into the auction, which Prime Minister Manmohan Singh has so far refused. The stalemate disrupted the entire session that ended in December, making it the least productive in at least 25 years. The legislature is scheduled to meet from Feb. 21 to pass the government’s budget.
Companies including Unitech, Tata Teleservices Ltd. Shyam Telelink Ltd., now known as Sistema Shyam Teleservices Ltd., and Swan sold stakes in their wireless ventures at significant premiums to the price they paid for spectrum, the Comptroller and Auditor General of India said.
Telenor ASA invested 61.2 billion rupees to buy a 67.25 percent stake in its venture with Unitech, the auditor said.
Emirates Telecommunications Corp. said in a statement today that it acquired its stake in Etisalat DB in December 2008, after Swan had applied for and obtained its license. The company said it will cooperate with Indian authorities if approached.
Responding to the CBI’s Feb. 3 statements in a Delhi court, Balwa said in an e-mail that “arguments across the bar have no relevance and hence do not warrant a comment. What matters is what is contained in the application and the order of the court.”
Sharad Goswami, a spokesman for Unitech Wireless Ltd., the venture with Telenor, didn’t immediately comment when contacted on his mobile phone.