$39 Billion Mobile Phone Scam Threatens to Destabilize Indian Government

In the biggest government scandal in years, Indian politicians are accused of taking kickbacks to sell $39 billion worth of mobile phone bandwidth licenses at bargain-basement prices.

A self-made billionaire is accused of swindling the Indian government out of a stunning US$39 billion in a case that is shocking the subcontinent. The scam itself is something out of a movie—a loose coalition of Indian, Middle Eastern and Norwegian corporations, tycoons and government officials conspired to put coveted mobile phone bandwidth rights on sale for next to nothing. The result is a scandal of Enron-like proportions that could well destabilize India's government.

Shahid Balwa, a high-school dropout turned billionaire, was arrested by India's Central Bureau of Investigation this week on charges related to a 2008 decision by the Indian government to sell 2G mobile telephone network operating licenses at cut rates. Balwa, vice chairman of the Indian-Emirati joint venture Etisalat DB, is widely believed to have played a key role in bribing government officials to auction off coveted bandwidth rights at one-tenth of the expected price.

Former Indian Minister of Communication and Information Technology Andimuthu Raja was also implicated in the scandal. Raja approved the sale of 2G spectrum licenses at below market value to a real-estate firm and a newly created telecom firm who quickly sold them at massive profit to Etisalat DB and to Norwegian industry giant Telenor.

Raja resigned in disgrace several months ago over allegations relating to the scandal. Balwa's detention has been the highest-profile legal move in the case yet, and more arrests are likely. Observers are expecting more Indian politicians to resign or to face legal charges over kickbacks in the following months.

The New York Times is referring to the incident as "India's Teapot Dome." Etisalat DB is a corporate cousin of Etisalat, one of the largest mobile phone providers in the Middle East.

Meanwhile, the scandal—which implicates several other high-ranking politicians besides Balwa—is so politically dicey that the Indian government is considering opening a special court dealing exclusively with mobile phone scam-related cases.

[Image via Flickr user Karmalize]

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  • Louann Oravec

    This is why I am glad RIM did not bow to India, to make company e-mails searchable by the Indian government. If the Indian government was this corrupt, and easily scammed. Just think of the jeopardy the RIM companies would have been in.