FIPB pulls the plug on ByCell's India plans

NEW DELHI: The government has withdrawn its approval to little-known Swiss-registered firm ByCell to launch telecom services in India in an unprecedented move triggered by renewed security concerns about the antecedents of its main promoters.

The Foreign Investment Promotion Board (FIPB), a nodal government body that clears all foreign investment proposals in India, withdrew the permission after the revenue department and the ministry of home affairs asked it to review ByCell���s application on grounds of security.

ByCell, founded by a group of Russian businessmen, was to hold 74% in the Indian telecom company with Hyderabad-based Jayalakshmi Group, which has interests in tea, tobacco, cotton yarn and power, owning the rest. Both companies had announced this joint venture in 2006.

ByCell CEO Alexandre Louzine told ET that his company had not received any information from the government or FIPB about withdrawing its clearance. ���If such a decision has been made, it is a big mistake. It will damage the image of India and hurt the flow of foreign investment into the country,��� he said.

���It is not a simple thing to withdraw clearances, especially after we have made considerable investments here. Besides, the Indian government has also collected fees from us for our telecom licence,��� said Mr Louzine, adding that the company had offered detailed clarifications to all queries raised by both the home ministry and FIPB.
FIPB had previously cleared ByCell���s application twice over the past two years, but the government had held up the formal issue of licences to the company citing one reason or the another.

ET had first reported in its edition dated May 13 that the MHA and the revenue department had sought that FIPB review the clearance it has given to ByCell to launch telecom operations in India.

The revenue department had expressed concerns to FIPB about ByCell���s shareholding structure, its source of funding and the lack of clarity about the company. It had said the company be allowed to launch operations only after it offers clarity on these issues.

ByCell already holds a letter of intent for launching mobile services in Assam, Bihar, north-eastern states, Orissa and West Bengal, but the Department of Telecom (DoT) had withheld its licence for the past 15 months over its failure to obtain a formal clearance from FIPB.

Earlier this year, FIPB had cleared ByCell���s applications, after the telco had approached the courts, alleging that its licences were being withheld despite DoT approving its application, collecting payments, bank guarantees and even issuing letters of intent in early-2008.

In January 2006, ByCell had received FIPB approval to invest Rs 500 crore and launch mobile services in five circles (spread across 13 states). And in February 2008, following clearance from the home ministry, the company had again obtained the board���s approval to apply for telecom licences in the remaining 17 circles in the country and raise its investments in India to $500 million.