Spectrum Scam – A Cover up?

The Union Minister of Telecommunications Mr. A. Raja, now being popularly known as SPECTRUM Raja has become a famous personality overnight. The Spectrum Scandal which has cost the government more than rupees 1 lakh crore is supposed to be the biggest scam the country has ever seen.

The Ministry of Telecommunications held by Raja is in charge for the allocation of Spectrum to the companies which offer mobile phone services in the country. In the year 2008, 2nd generation (2G) Spectrum for GSM service providers was allotted to the private players. There were a lot of controversies in the way Spectrum allocation took place by 2008 itself, now the minister’s office is being raided by the CBI for further investigation.

The Minister claims that there is no truth in the allegations against him; he says that whatever procedure was followed in the year 2001 has been adopted by him as well. But there were mere 50 lakh subscribers in the year 2001 compared to 37.5 crore mobile phone users by the end of March 2008; there has been an exponential growth in the Mobile Market which is known to all of us. The fact that the market has grown by leaps and bounds in between 2001 and 2008 is unquestionable.

In the year 2001 the government was shouldering the responsibility to nurture the mobile services market, therefore the Spectrum license was not auctioned then. Even the private players in the industry would not have anticipated such a colossal growth in the mobile services market. The Government was then in a position to motivate and attract private players to operate in the mobile services space.

But that is not the case in 2008. Both domestic as well as MNC players consider investing in Telecommunications extremely profitable. In this sort of a scenario if the government decides to fix the same price, following the same procedure as it did in the year 2001 then it would be a deliberate attempt to put too small a price for the 2G spectrum.

The Telecom Regulatory authority of India (TRAI) is a statutory body found by the government of India in 1995 to avoid excessive government interference in pricing and policy. The TRAI had advised the Telecom ministry to auction the Spectrum License in the years 2001, 2003, 2007 respectively. But the Telecom ministry held by Raja had completely neglected TRAI’s recommendations and allotted the 2G spectrum license on first come first serve basis. More than that fact, Mr. Mishra (TRAI - Head) in his letter dated 14th Jan 2008 to the Telecom Ministry had clearly pointed out that the Ministry has ignored all the crucial recommendations of TRAI and considered a few points for name sake.

The last date to submit applications for 2G spectrum was announced as 1st October 2007 by the ministry as on 24th September. Later an artificial cut-off date, Sep 25, 2007, was created and applications received between Sep 25 and Oct 1 were summarily rejected. (This in itself is a clear violation of TRAI’s guidelines).

Datacom Solutions, Yestel, Shyam Telelink, Loop Telecom, Spice, Idea Cellular, Tata Teleservice, Swan and Unitech were given license for 2G Spectrum. The total fee generated by the government for selling license to the above 9 companies is 10, 772.68 crore.

Out of the companies mentioned above, the two companies Swan and Unitech do not have any prior experience in the business of mobile phone, broadband or related services. Swan Telecom has obtained Spectrum license to operate in 14 circles for an amount of 1537.01 crore while Unitech has obtained license to operate in 22 circles by paying 1651 crore respectively.

Within a matter of six months these two companies have sold majority of their stake to foreign companies. Swan Telecom had sold 45% of its shares for a whopping amount of 4050 Crore to a company called Etisalat which is based out of UAE due to which the valuation of Swan Telecom had increased to Rs. 9990.56 crore. Unitech had sold 60% of its stares to a Norway based company Telenor for Rs. 6120 crore due to which the valuation of Unitech had increased to a monstrous amount of 10, 731 crore. Just by leveraging their ability to acquire Spectrum license, Swan and Unitech had made massive 700% return on their investment within a matter of six months.

Raja’s ministry made Rs. 10,772.65 crore by selling 2G license to 9 companies whereas Swan and Unitech just by selling half of their stake had proved the fact that their license is worth more than 20,000 crore. If we consider the market value of these two companies, the Government by selling license to these nine companies should have generated 70, 022.42 crore as license fee. In that way our country has incurred a loss of over Rs. 60, 000 crore.

The Central Vigilance had written a letter to the Telecom Department stating the irregularities in allocation of 2G Spectrum as on 15th of December 2008. It had clearly mentioned that it is highly disappointed with the way 2G Spectrum was licensed. Even after that, Raja while answering to a question in Parliament had told that 2G Spectrum was allotted on first come first serve basis; he had also mentioned that neither TRAI nor the Vigilance had raised objections, which is against truth.

TRAI head Mr. Mishra had clarified in an interview (December 2008) that nowhere in the guidelines or recommendations of TRAI it had mentioned that Spectrum needs to be allotted on first come first serve basis. The Chief of the Central Vigilance Mr. Prathyush Sinha had told in an interview (April 2009) that it is evident that there have been severe irregularities in 2G Spectrum allocation.

Despite all misshapes the Congress party, Prime Minister and the Finance Minister are trying to hold up the Telecom Minister A. Raja due to political pressure from the DMK which is obvious. In fact Raja has said on record that whatever he has done has been discussed and in consent with the Prime Minister. This very fact is even more shocking than the scam in itself.

Let us hope that the Congress led UPA government does not pressurize the CBI considering the interest of its ally, the DMK.

Jai Hind.

The author blogs @ www.hari-bala.blogspot.com

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