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CAG goes after another spectrum deal

Madhumathi D.S. & Thomas K. Thomas

Preliminary estimates point to loss of more than Rs. 2,00,000 crore; Department of Space, ISRO under scanner

PHOTO: V. SREENIVASA MURTHY

MORE SPECTRUM TROUBLE:Antariksh Bhavan in Bangalore houses Antrix Corporation, the commercial arm of ISRO. Antrix's S-band spectrum deal with Devas Multimedia raises disturbing questions.

BANGALORE/NEW DELHI: Hard on the heels of its explosive investigations of the 2G spectrum allotments made in 2008 by the Department of Telecommunications, the Comptroller and Auditor General (CAG) has started inquiries into a 2005 agreement between the Indian Space Research Organisation's commercial arm Antrix Corporation Ltd. and Devas Multimedia Private Ltd.

The agreement relates to ISRO's launching of two satellites for Devas but automatically bestows on the latter a large hidden benefit: unbridled use of 70 MHz of the scarce S-band spectrum over a 20-year period.

ISRO is under the Department of Space (DoS), which is directly in the Prime Minister's charge.

Business Line learns that according to preliminary CAG estimates, this spectrum largesse to a private customer could have caused the exchequer a loss in excess of Rs. 2 lakh crore. According to the contract with Devas, Antrix would have earned $11 million a year per satellite for 12 years.

By comparison, the presumptive loss incurred in the allocation of 2G spectrum by the DoT, as estimated by the CAG, is Rs 1.76 lakh crore.

Under the deal, Devas Multimedia is to get access to 70 Mhz of broadband spectrum in the 2500 Mhz band. This was once used by Doordarshan to deliver programmes by satellite to all parts of the country but is now considered to be of enormous commercial value for high-speed, terrestrial mobile communications. In 2010, the Union government got nearly Rs. 67,719 crore from the auction of just 15 Mhz of similar airwaves for 3G mobile services.

Devas Multimedia is a company in which Deutsche Telekom is a minority equity stakeholder. Dr. M.G. Chandrasekhar, Devas Multimedia Chairman, is a former Scientific Secretary at ISRO.

Although the Space Commission in July 2010 strongly objected to the contract and recommended that it be scrapped, this has not happened. However, Devas Multimedia has been given some spectrum to conduct trials.

According to the contract, copies of which are available with Business Line and The Hindu, Devas Multimedia is entitled to get a total of 70 Mhz of the S-band spectrum on lease for 20 years. The contract requires ISRO to build and launch two communications satellites — GSAT-6 and GSAT-6A — at a further cost of Rs 2,000 crore. Devas Multimedia will get to use 10 transponders on each of the satellites.

The CAG is reported to have asked for an explanation from the DoS on the preferential allocation of S-band spectrum without DoS/Antrix going through a competitive bidding process; on diverting public resources out of ISRO's budget towards two customer-specific satellites for Devas Multimedia; and misinforming regulators about the project's financial aspects and its full commercial implications.

The contract, unlike others ISRO has signed in the past, places no restrictions on Devas Multimedia for onward lease of spectrum.

On May 31, 2010, Business Line first reported the preferential maiden allotment of S-band spectrum to Devas Multimedia, which planned to launch digital satellite multimedia broadcast services (D-SMB) in India using that space infrastructure.

It is the first time the S-band, which ranges from 2500 to 2690 Mhz, has been opened up to the private sector. And this has been done on the quiet.

* * *

CAG's concerns over deal

  • S-band spectrum was allocated without inviting competitive bids
  • Organisational control systems were not followed
  • The Prime Minister's Office, the Cabinet, and the Space Commission have not been properly informed about the contract details, including the

    underestimation of ISRO's costs

  • Public resources were diverted to build two customer-specific satellites

  • Devas Multimedia's terms deviate from those in past commercial contracts of ISRO/Antrix.

    * * *

    What is Devas Multimedia?

    The Bangalore-based start-up, founded in 2004, is headed by Dr. M.G. Chandrasekhar, former Scientific Secretary at ISRO. He was earlier Managing Director of the satellite radio company WorldSpace, which shut shop in India last year. In 2008, Deutsche Telekom picked up 17 per cent stake in Devas for about $75 million. Columbia Capital and Telcom Ventures are the other international investors. The board of directors includes Kiran Karnik, a former President of Nasscom; Larry Babio, a former vice-chairman of Verizon, and Gary Parsons, a former Chairman of XM Sirius Satellite.

    What's the plan?

    It wants to offer satellite broadband services across India on various platforms, including mobile. It claims to have developed its own portable device, which acts like a WiFi router. The company is already in talks with the Indian Railways for a host of services such as real-time location spotting and collision avoidance. It claims to have done successful trials in 2009 and 2010.

    How is the rollout planned?

    On January 28, 2005, Devas Multimedia reached an agreement with Antrix, ISRO's commercial arm, to lease S-band transponder capacity on the yet-to-be launched GSAT-6 and GSAT-6A. Under this, along with the transponders, Devas Multimedia gets access to about 70 Mhz of spectrum in the 2500 Mhz band. Devas Multimedia is planning to launch broadband services through a combination of satellite and terrestrial networks.

    What was the agreement?

    Devas Multimedia will pay $40 million as pre-launch capacity reservation and $250 million for satellite capacity lease payments. ISRO/Antrix has a representative on the Devas Multimedia board of directors. The two will share revenue once services start. The exact revenue share is not known. The company plans to invest $500 million to $750 million once the service is launched.

    When will the service be launched?

    Originally the two new satellites were supposed to be launched from India in 2010, but this got delayed. Now ISRO is looking to launch GSAT-6 through Arianespace, a European consortium, because the agreement with Devas Multimedia has a penalty clause for delays. Devas Multimedia claims it is ready to go as soon as the satellite is up in the sky.

    Does Devas have the required licences?

    It has an Internet Service Provider licence. It has clearance from the Foreign Investment Promotion Board (FIPB) for 74 per cent foreign direct investment. It has got trial spectrum from the DoT and plans to apply for a full licence. But it may have to acquire additional licences such as that for Global Mobile Personal Communications by Satellite (GMPCS) in order to offer satellite-based services. It is also not clear if Devas can use terrestrial spectrum without making additional payments.

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