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Rediff.com  » Business » Global investors fret after govt cancels Devas deal

Global investors fret after govt cancels Devas deal

February 21, 2011 13:13 IST
The annulment of Devas Multimedia's deal with Antrix, the commercial arm of Indian Space Research Organisation, has not only taken the Devas management by surprise but also raised concerns among experts and global investors of the company.

Deutsche Telekom, a minority shareholder in Devas Multimedia, expressed its concerns in a communication to Business Standard.

Replying to a questionnaire, Sylvia Braunie, spokesperson of Deutsche Telekom, said: "With mounting concern, Deutsche Telekom has been following the recent developments in India with regard to the termination of the contract between the Indian Space Research Organisation and Devas Multimedia."

When asked if any legal action was being planned against ISRO, Braunie said: "We cannot comment on behalf of Devas."

Also, Deutsche Telekom did not comment on reconsidering its investment in the Indian multimedia firm following the controversy.

Deutsche Telekom, a leading telecom firm of Germany, had acquired 17 per cent stake in Devas.

The latter entered into a partnership with Deutsche to leverage its expertise in the convergence of telecommunications and multimedia technologies.

When contacted, the Devas team did not comment on whether it would take legal action. In an earlier statement, the company had indicated it might take legal recourse if the deal was annulled.

On Thursday, the government had officially scrapped the deal between Antrix and Devas Multimedia.

The decision was taken at a meeting of the Cabinet Committee on Security chaired by Prime Minister Manmohan Singh.

Due to the country's strategic requirements, it would not be able to provide orbit slot in S-band to Antrix for commercial activities, the government had said.

In 2005, Antrix signed a contract with Devas Multimedia to build two satellites on which Devas would lease transponders in India. Bundled into the deal was 70 MHz of S-Band spectrum.

According to the deal, Devas was to offer satellite-based services.

After reports of a possible revenue loss, the government and ISRO said the project was already under review and action had been initiated regarding the termination of the contract.

In December 2009, ISRO ordered a review of the deal and subsequently the Space Commission recommended its annulment on July 2, 2010.

Prime Minister Manmohan Singh has appointed a two-member committee to review the Antrix-Devas deal. The decision to scrap the deal came even before the committee submitted its report.

One of the advisors to Devas, who did not wish to be named, said the company should seek a legal option.

"If there was any procedural error, the government should have discussed the matter. Annulment of the contract is not a solution," he added.

Besides Deutsche Telekom, other investors in Devas include Columbia Capital and Telcom Ventures.

Regarding the annulment of the deal, industry expert B K Syngal, who advises various telecom firms in the country, said: "It is a knee-jerk reaction. It will have much wider implications. Investors will now feel wary about investing in India."

Syngal, former CMD of Videsh Sanchar Nigam Ltd, said the government should have at least waited for the committee's report.

"Optical fibre is not sufficient to cover the whole country, a satellite component is must. The country needs satellite multimedia technology," he said.

Piyali Mandal in New Delhi
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