The Department of Telecommunication (DoT) will send show-cause notices to Loop Telecom seeking an explanation as to why its licences should not be cancelled. The notices are being issued on grounds that the company was owned by the Essar Group at the time of applying for licences.

Loop Telecom was given 21 licences in 2008 but is yet to start rolling out services. While the telecom regulator had earlier asked the DoT to terminate the company's licences for failing to meet the rollout obligation, the Comptroller and Auditor-General (CAG) had cited irregularities in the application made by the company.

According to the draft show-cause notice prepared by the DoT, Loop Telecom had violated the cross-holding norms stipulated under the licence conditions whereby a single company cannot hold more than 10 per cent stake in two different telecom entities operating in the same areas. Since the Essar Group holds 33 per cent stake in Vodafone-Essar, it could not have owned more than 10 per cent stake in Loop Telecom.

According to the DoT, Santa Trading was holding 85.75 per cent of BPL Communications which, in turn, held 95 per cent stake in BPL Communications that had 83.99 per cent of BPL Mobile, which owned 51.24 per cent in Loop Telecom. Essar Group invested Rs 1,592 crore in non-secure non-convertible debenture of Santa Trading.

Reacting to the development, both Essar and Loop Telecom's spokespersons said that they are in compliance with the licence norms. Earlier in April 2010, while responding to a question in the Rajya Sabha, the Telecom Ministry had stated that it had not found any violation by Loop.

tkt@thehindu.co.in

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