NEW DELHI (Reuters) - Two Indian companies, in which Norway's Telenor and the UAE's Etisalat now hold large stakes, were given preferential treatment in awarding mobile licences, the CBI said, in a sign a corruption scandal could spread to the business world.
A Central Bureau of Investigation (CBI) lawyer named Indian companies Swan and Unitech as receiving favourable treatment over awarding of licences in 2008 in the world's fastest growing mobile phone market.
The CBI, the Indian equivalent to the FBI, arrested former telecoms minister Andimuthu Raja on Wednesday over irregularities in awarding licences and radio spectrum at below market prices, potentially causing a loss to the India of up to $39 billion.
"Undue favours were granted in the allocation ... The companies were favoured and spectrum and licences were awarded at a low rate," special public prosecutor Akhilesh, who uses only one name, told the court.
The telecoms corruption scandal has reached all the way to Prime Minister Manmohan Singh, who has been forced by the Supreme Court to explain why he took more than a year to look into allegations of wrongdoing in awarding of licences in 2007-2008.
Singh decided not to pursue a case against his minister. Instead the CBI went after Raja after the Supreme Court ordered it to do so.
The opposition stalled parliament late last year over demands the government agreed to a full parliamentary probe into what is considered the biggest corruption scandal in decades, touching the core of the coalition government.
The government is currently not at risk of collapsing because it holds a slim majority but the scandal has shaken the reputation of Singh, who has been asked to resign by the opposition.
Raja, who was sacked in November, is accused of misuse of his ministerial office to give favourable treatment to certain companies in the licence process, criminal misconduct and having unaccounted assets.
Ramesh Gupta, a lawyer for Raja, said the former minister had followed existing rules and had not committed any wrongdoing.
Norway's Telenor, which is 54-percent owned by the Norwegian state, has a majority stake in Unitech Wireless. UAE's Etisalat owns about 45 percent of Swan, which has since been renamed as Etisalat DB.
Both companies were not immediately available for comment but have in the past denied any wrongdoing.
Both Telenor and Etisalat bought their stakes at a considerable premium after the Indian firms were given the licenses.
Additional reporting by Devidutta Tripathy; Writing by Paul de Bendern; editing by Alistair Scrutton