WiMax Scam - another murky deal of Indian telecom industry

(Reports appeared on 'The Pioneer' daily on the blatant corruptions in the WiMax franchise allotment of the state owned telecom company BSNL)

May 6, 2009 – The Pioneer

Telecom Minister’s Confidant enters into WiMax deal with five shell companies

After the 2G spectrum allocation, the Telecom Ministry headed by Union Minister A Raja is embroiled in yet another controversy, this time over BSNL’s WiMax franchise. While top officials of the public sector firm say nothing has yet been finalised, The Pioneer has learnt that the technical committee has short-listed six companies, of which five have been floated by Raja’s confidant Sanjay Kapoor and are filled with the latter’s relatives.

Not just that, all the five firms were registered on a single date, having the same notary, same auditor, same witnesses and even the same e-mail id. So much so that even the last annual general body meeting they held were on the same day. The sixth company is a BPO, owned by a former MP and Congress leader from Tamil Nadu.

The five firms are: WiExpert Communications, SV Telecom Systems, Digitelco Communications, Spectrus Communications and Technotial Infoways. This reporter visited the ‘registered office addresses’ of these five companies and found they were residences with no display of even the firms’ name boards. These companies had applied for 14 circles across the country. These companies were incorporated on November 5, 2007.

Sanjay Kapoor is said to be a regular visitor at the Sanchar Bhavan and Electronics Niketan, the two main offices of the Ministry. He frequented the Environment Ministry when Raja was Environment Minister. Kapoor’s companies are technically supported by WiTribe, a Qatar-based telecom firm. WiTribe is a WiMax operator in Pakistan.

While Sanjay Kapoor was not available on phone despite repeated attempts, The Pioneer got in touch with his driver Vijay Pal who also happens to be a director of one of the five firms. According to Pal and documents available with The Pioneer, WiExpert’s Managing Director is Anamika Kapoor, Sanjay's wife. Her mother, Sneh Prabha Arora, is a director of the company. SV Telecom’s head is Anamika’s father Surendra Mohan Arora. The firm shares its registered office with WiExpert at Flat Number 8 in S-569 in Greater Kailash-II.

Satish Kapoor heads Spectrus Communication and the registered address of the company is Surendra Mohan Arora’s residence at Paschimi Marg in Vikaspuri, while Digitelco Communications, headed by Satish Kapoor’s wife Kamini Kapoor, is registered at their residential address in Vikaspuri. Driver Vijay Pal is also a director in Digitelco.The fifth company, Technotial Infoways, is led by Sunita Kapoor, who is Sanjay Kapoor's mother, according to Pal. This firm is registered at her residential address in Samrat Apartments in Vasundhara Enclave.

The Pioneer had made several attempts to contact Sanjay Kapoor, who floated all these companies, but he did not respond to them. Queries sent to his email id, provided as the contact address of all the five companies in the records of Registrar of Companies of Delhi, went unanswered.

The Pioneer on March 5, reported about another of Raja’s close associate’s company participating in the WiMax franchise allotment by the BSNL. Chennai-based Wellcom Communications owned by T Silvarajoo had applied for six circles of BSNL. Silvarajoo is from Raja’s constituency Peramballur in Tamil Nadu and considered close to the Minister.

After The Pioneer’s exposé, the BSNL refrained from short-listing Wellcom. “After the relation between the Minister and Wellcom Communications was exposed, Raja asked BSNL chief Kuldeep Goyal to re-work the entire plan of operations,” revealed a highly placed official of the BSNL. Along with Wellcom, two established names, Wipro and Cisco, too, were cut out from the shortlist.

The sixth company shortlisted was Bangalore-based Raasi Callnet, owned by C Narasimhan, former MP and Congress leader from Tamil Nadu. Raasi Callnet is a BPO company and in the business for the past eight years. Narasimhan was a Tamil Manila Congress MP in 1996, representing Krishnagiri constituency.

Meanwhile, the BSNL granted WiMax franchisee in January to Soma Networks in the three States earning most revenue — Maharashtra, Gujarat and Andhra Pradesh — without any tender or Expression of Interest. Soma Networks is a US-based company floated by Indians. Former Planning Commission member MS Pathak, son of former Vice-President of India GS Pathak, is the chairman of Soma Networks. Yatish Pathak, MS Pathak’s son, is the Chief Executive Officer of the firm.

Several WiMax operators, had complained to the Prime Minister over the unilateral allotment of franchisee to Soma Networks.WiMax is a high-speed Internet service that provides connectivity in mobiles and laptops. The BSNL decided to invite franchisees from private players for providing WiMax services.

In what raised suspicions, it invited Expression of Interest a few months ago and cancelled and re-opened the procedure several times. Highly placed officials of the BSNL and Telecom disclosed to The Pioneer that, by this procedure, the BSNL would get 25 per cent of the revenue while 75 per cent will go to the private player. The annual revenue from WiMax is expected to be Rs 900 crore, according to BSNL estimates. A total of 11 companies responded to BSNL’s WiMax franchisee allotment. The main advantage of the WiMax franchisee of the BSNL is control over 20 MHz spectrum without any investment.

“They can use BSNL’s 50,000 communication towers, 20,000 office premises and two million kilometres of fibre network across the country, which are the exclusive property of the nation, free of cost. The role of shell/benami companies is to sell the stakes at whopping prices to foreign companies. It will be like Swan and Unitech deals, offloading the shares to huge values. This is the profit of WiMax business,” a Telecom official said.

BSNL Chairman and Managing Director Kuldeep Goyal did not respond to repeated attempts to obtain clarifications.

[The above photo shows, Sanjay Kapoor (right), the man who floated five companies which are shortlisted for BSNL’s WiMax allotment, with Telecom Minister A Raja at his birthday celebration on October 26, 2008, at the Minister’s official residence in New Delhi]
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March 5, 2009 - The Pioneer

Max greed: Raja’s friend shows how to mint profit

Even as the dust is yet to settle on the 2G and 3G scandals allegedly involving A Raja, the Union Telecom Minister is embroiled in another controversy. This time, it is to do with the allotment of franchisees for BSNL’s recently-launched WiMax services to a company owned by one of the Minister’s close associates from Perambulur.

The company, Wellcom Communications India Pvt Ltd, has applied for licences to seven most revenue-generating of the 16 circles in India.According to sources, the revenue-sharing pattern agreed upon is 75 per cent to the private party and 25 per cent to BSNL. Sources said that if the company gets the nod for the 20 Mega Hz spectrum, it may sell off stakes to foreign players at huge profits, like in the 2G case.They have questioned the need even for the appointment of franchisees when the BSNL can directly provide the service.

WiMax technology provides wireless Internet and voice in future to laptops and mobile phones. The number of WiMax connections is expected to rise to 50,000 subscribers in the first year itself, leading to a target of 1 million subscribers in five years in each circle.Wellcom Communications applied to be a franchisee in November 2008.The Chennai-based company, which was initially engaged in minor engineering and construction works, was formed in December 2006 with a Rs 10-lakh capital. This went up to Rs 10 crore in November 2008, apparently with an aim to enhancing the company’s credibility for the WiMax bid.

Wellcom Communications is represented by T Silvarajoo (55) with 15 per cent shares. The other two directors are Dato Vijayakumar Ratnavelu (47) and T Gunasegaran Thiagarajan, both Tamilians with a Malaysian citizenship. Dato Vijayakumar is also running a company with the same name in Malaysia.Silvarajoo hails from Raja’s constituency Perambulur and is a close associate of the Minister. He is also associated with Dr C Krishnamoorthy, in whose building Raja had begun his legal practice in the constituency. Silvarajoo is currently a sub-contractor of CPWD’s road works. He supplies pellets from a quarry owned by Krishnamoorthy for the ongoing Chennai-Tiruchirappally National Highway (NH-45) project.

The Pioneer had earlier reported that Krishnamoorthy headed a real estate company, called Kovai Shelters, with Raja’s nephew and two nieces on its board of directors with 45 per cent shares.Though the BSNL had invited franchisees a year ago, it postponed the bid several times allegedly due to pressure from the Minister who, sources said, kept adding names to the original list. Apparently under Raja’s pressure, BSNL chairman and managing director Kuldeep Goyal initiated the franchise-awarding procedures in mid-January. Despite repeated attempts by The Pioneer, the CMD refused to talk to this newspaper.

Wellcom Communications has applied for Chennai, Karnataka, Rajastan, Bihar, UP (West), Haryana and Orissa circles.The Pioneer has learned that the BSNL would finalise the franchise by next week.

The Pioneer had earlier reported that the BSNL had entered into an unprecedented arrangement with the private party, Swan Telecom, for intra-circle roaming service without any financial benefit to the public sector unit. Though a BSNL expert committee had suggested a levy of 52 paise per call, it found no mention in the MoU signed with Swan.The Pioneer has also reported the saga of two companies owned by the Minister’s close relatives. Green House Promoters (Private) Limited and Equaas Estates (Private) Limited were floated soon after Raja became a Union Minister. His wife Parameswari also served as a director on the board of these two firms.

[The writer is Special Correspondent of ‘The Pioneer’ daily]