Balwa protests innocence after arrest

Indian 2G Scandal: The vice chairman of Etisalat's Indian subsidiary was arrested in Mumbai for his alleged involvement in a multibillion dollar telecom scandal - Special Report.

India's Central Bureau of Investigation (CBI) officials escort Shahid Balwa (C, in black) at the CBI headquarters in New Delhi. Reuters

A Mumbai court yesterday remanded the vice chairman of Etisalat's Indian subsidiary to two days in official custody after it was alleged he was involved in a multibillion-dollar telecommunications scandal.
Shahid Balwa's arrest on Tuesday evening came just a week after officials detained the former telecoms minister Andimuthu Raja and two close aides for alleged irregularities in the allocation of second-generation spectrum to telecoms companies in 2008.
India's central bureau of investigation (CBI) alleges Mr Balwa conspired with Mr Raja to obtain licences at deflated prices for his company Swan Telecom. Later, Etisalat teamed up with Swan Telecom to form Etisalat DB.
The alleged scam, which involves nearly a dozen other telecoms companies, resulted in a loss of 220 billion rupees (Dh17.77bn) in revenue for the national exchequer.
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Mr Balwa is the first non-government official to be arrested in the case. He denies any wrongdoing and says he is being "singled out" among several other companies under suspicion for obtaining 2G licences at throwaway prices. DB Realty, the Mumbai parent company that owns Swan Telecom, said Mr Balwa did nothing "inappropriate or illegal", stressing he had been "wrongly implicated".
But the CBI alleges that "an arbitrary condition" for awarding spectrum licences was set by Mr Raja - in charge of the telecoms ministry at the time - to favour a few selected operators, including Etisalat DB.
Last week, a lawyer for the CBI told an Indian court that the company, along with Norway's Telenor, another suspected player that owns a majority stake in India's Unitech Wireless, collectively resulted in a loss of 71.05bn rupees.
Etisalat, which owns a 45 per cent stake in Etisalat DB, said yesterday the licences were awarded before it entered into a partnership with Swan.
Analysts say Mr Balwa's arrest is symptomatic of an aggressive push by the government to discover the money trail in the spectrum sale.
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His arrest is one among a series of setbacks faced in recent weeks by Etisalat DB, which is keen to expand its footprint in the world's second-fastest growing telecoms market, with more than 700 million mobile phone subscribers.
In December, Etisalat DB paid India's department of telecoms a penalty of 99 million rupees for missing its deadline to launch 2G services in four zones.
And in December, an Indian court slapped a notice on the company along with 10 other private operators, responding to a petition by a non-governmental organisation seeking the cancellation of their 2G licences.
The scandal has caused deep embarrassment for India's ruling Congress party-led government, which is accused by opposition parties of being soft on corruption. One of many to have rocked the government in recent months, it disrupted parliamentary proceedings for the entire session that ended in December.
"The biggest harm such [corruption] scandals do is that they raise doubts in the minds of investors," said Sanjay Dutt, the chief executive for business development at the Mumbai property services firm Jones Lang LaSalle Meghraj. "They begin viewing India's [dynamic] sectors differently. They begin viewing India differently."
 
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