March 5: The department of telecommunications (DoT) has given the Tata Teleservices-Virgin mobile deal a clean chit, while the GSM lobby is crying foul over the deal.

DoT secretary Siddharth Behura said today: “We’d asked Tata Teleservices to provide the details of their agreement with Virgin Mobile, which they are expected to provide soon.”

An arm of the DoT — the wireless planning and co-ordination wing — will submit a report on the deal within 10 days.

Officials of the DoT said a greater clarity on the alliance would be obtained once the department gets the report.

Asked whether Virgin Mobile’s entry required clearances from the DoT and the Foreign Investment Promotion Board, Behura said: “Virgin hasn’t come as a foreign investor, it is only a franchisee. Whatever royalty that will have to be paid for this is an internal matter between Tata and Virgin. It doesn’t require approvals from the DoT.”

Finance ministry officials said laws allowed foreign telecom companies to set up shop as a franchisee. However, “they would require approval if they were to repatriate royalty fees from an Indian company for the use of a foreign brand name”.

Earlier this week, the GSM lobby Cellular Operators Association of India (COAI) had written to the DoT, asking it to look into the agreement and clarify whether the Tata-Virgin deal was really a franchisee agreement.

The COAI has sought to know in what capacity Virgin Mobile is entering the Indian market and the terms and conditions of the agreement with the Tatas.

“The DoT hasn’t conveyed anything to us so far. Usually, in a franchise agreement, the franchisee company uses the name of the parent company and pays for it. In this case, it’s Tata Teleservices which is paying Virgin for the use of its brandname. We find this arrangement very peculiar,” said COAI director-general T.V. Ramachandran.

CDMA player Reliance Communications has also alleged that Virgin was trying to disguise its entry as an MVNO (mobile virtual network operator) in India with Branson’s attention seeking tactics.

Under the MVNO model, telecom operators buy talk time on wholesale rates from existing mobile operators and then sell it to subscribers under their own brand.

The government has been thinking of opening up this sector but has not done so.

Ramachandran said under the deal with the Tatas, Virgin was providing incentives on airtime to customers. “How is that possible without Virgin buying bulk airtime from the Tatas, which amounts to the deal being an MVNO.”

However, Tata Teleservices and Virgin Mobile are seeing the deal in terms of brand extension.