The axe has finally fallen on the Antrix-Devas deal with the Cabinet Committee on

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Security deciding to annul it.

This is a huge blow to Bangalore-based Devas, formed in 2004 by a team of entrepreneurs and executives as well as investors such as Deutsche Telekom, Columbia Capital and Telcom Ventures.

Following intense speculation and prime minister Manmohan Singh’s hint on Wednesday that an annulment of the deal may happen, law minister M Veerappa Moily said on Thursday the government would not be able to provide orbit slot in S-band to Antrix for commercial activities. This orbit slot includes segments that are subject to existing contractual obligations.

Devas was awaiting the delivery of the contracted space segment capacity, which was delayed for more than two years as per the 2005 agreement. Antrix, a government company, is a marketing arm of the Indian Space Research Organisation.

Moily said the decision was taken after recognising the fact that government policies with regard to allocation of spectrum have undergone a change in the past few years.

Devas has always maintained that the Antrix agreement is in line with the government’s 1997 Satcom Policy. Devas chairman MG Chandrasekhar and chief technology officer D Venugopal have held senior positions at ISRO.

Moily said there has been an increased demand for allocation of spectrum for national needs, including defence, paramilitary forces, railways and other public utility services as well as for the society with regard to the country’s strategic requirements. In the light of this policy, agreement for the lease of space segment capacity on Isro/Antrix S-band spacecraft by Devas Multimedia, entered into between Antrix Corporation and Devas Multimedia on January 28, 2005 shall be annulled forthwith, he said.

No explanation was given on why Devas was allowed to proceed on the project even when consents and approvals had to be obtained from the space commission and the Union cabinet, which was conveyed to Devas by Antrix in February 2006. Government officials had said earlier this month that the department of space had begun a review of the agreement between Antrix and Devas in December 2009 and recommended that it be annulled in July 2010.

In an emailed statement issued in the evening, Devas did not say much. “We are still awaiting a formal communication from the Government of India on the status of our contract. Once we get this information, we will be in a position to comment.”

Vinod Sunder R, who handles press inquiries at Devas, could not be reached for further comment. The cancellation of the deal puts a question mark on the future operations of the company, which in August 2010 said it had a team of 200 people. Sources said Devas is expected to take legal recourse to protect the company’s rights and interests as soon as it is officially notified. Devas has said that it has invested $400 million in technology development and manufacture.

Deutsche Telekom, in which the German government has nearly 32 per cent stake, did not immediately respond to an email seeking its reaction on the development. The Antrix-Devas agreement was for a dedicated portion of the leased transponder capacity on GSAT-6 and GSAT-6A with specifications that met Devas’s system configuration as part of the integrated satellite network Devas planned to deploy.

The Devas system was supposed to bring a wide array of benefits such as e-governance, education, disaster warning and secure communications (even under disaster situations) to citizens even in rural and remote areas, which according to Devas cannot be cost-effectively and rapidly rolled out through purely terrestrial systems.

According to PTI, defence minister AK Antony said a “mistake” was committed in reaching the deal without consulting the defence forces as S-band spectrum was mainly for the strategic forces in which the country’s three services got a major stake. S-band spectrum was a “very precious asset for us” and has to be given to the armed forces, paramilitary and other strategic forces, he said.

Antony said it was unfortunate that earlier they were not consulted by those who took the decision and added, in the future, the first priority would be for strategic forces and organisations.

Law ministry, in its opinion given on June 18, 2008, had made it clear that in the event of termination, Antrix shall be required to reimburse Devas all the upfront capacity reservation fees and corresponding service taxes received till that date.