Spectrum to new players was given on fixed licence fees and not auctioned as per the recommendations of the Telecom Regulatory Authority of India, communication ministry, target of criticism on the subject, said on Friday.
Responding to queries from the Central Vigilance Commission amid allegations from political parties that Rs 50,000 crore (Rs 500 billion) was squandered in distribution of spectrum, telecom ministry said it had gone by the book and had done nothing wrong.
"In the context of auction of 2G spectrum, Trai had observed that any differential treatment to a new entrant vis-a-vis incumbent will go against principle of level playing field," DoT said in its reply to the Central Vigilance Commission.
DoT senior officials said in the 2G (existing mobile services) band allocation through auction may not be possible as the service providers were allocated spectrum at different times of their licences and the amount of spectrum with them varies in quantity.
"Therefore, Trai felt that to decide the cutoff after which the spectrum should be auctioned will be difficult and might raise the issue of level playing field," DoT said in a five-page point-by-point reply to the CVC.
Replying to another query with regard to the sale of stakes by two new operators -- Swan and Unitech -- allegedly at huge premium, DoT said that 'the promoters of these companies have not sold their share holding but made strategic partnership for investment in the company.'
The licensor said these companies have stated that the investments brought in by their foreign partners would be used for rolling out services and this could enhance their capital base keeping the absolute shareholding of the promoters intact.
"Thus the question of of their making windfall profits does not arise," DoT said.
DoT officials said the finance ministry is of the view that foreign investment through dilution of equity of new telecom companies brings in FDI for roll out of the services.
At the same time, promoters' equity should not be allowed for sale, said the official.
To further press the case, the issue of prohibition of sale of promoters' equity for UAS licence holders is under the deliberation in the DoT.
Responding to the query of the CVC on the process of 3G spectrum auction process, DoT said existing operators as well as new players would be eligible to participate in the auction and the reserve price has been fixed at two times than recommended by Trai.
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