What is the 2G spectrum scam about?

[rohit bansal]

Here is a background on the 2G spectrum controversy that resulted in
Communications and IT Minister A. Raja of DMK resigning.

The issue dates to 2008 when nine telecom companies were issued scarce
airwaves and licenses for second generation (2G) mobile phone services
at Rs1,658 crore (less that $350 million) for a pan-India operation.
As many as 122 circle-wise licenses were issued.

The opposition said that by giving the airwaves cheap, that too in the
controversial manner of first-cum-first-served basis, the exchequer
had lost billions of dollars. The cut-off date for applications was
also arbitrarily advanced.

Later, based on the auction of airwaves for third generation (3G)
services, which got nearly $15 billion to the exchequer, and that for
broadband access, which fetched over $8.5 billion, the notional loss
was estimated at $38 billion to the exchequer.

But Prime Minister Manmohan Singh himself defended Raja's decision and
said on May 24 that all that his communications minister had done was
to implement a policy already in place and none of the norms were
flouted.

The opposition further stepped up its attack with two examples on 2G
auction:

- A new player, Swan Telecom, bought licenses for 13 circles with the
necessary spectrum for $340 million but managed to sell a 45-per cent
stake in the company to UAE's Etisalat for $900 million. This swelled
its valuation to $2 billion without a single subscriber.

- Another new player, Unitech, paid $365 million as license fee but
sold a 60- per cent stake to Norway's Talenor for $1.36 billion,
taking its valuation to nearly $2 billion, again without a single
subscriber.

Similarly, another licensor, Datacom, later became Videocon Mobile and
Stel now has large stake by Baharian Telecom. The other companies are
Tata Tele, Idea Cellular , Loop Telecom, Shyam Telelink and Spice.

As recently as last month, the Supreme Court asked the solicitor
general why the prime minister had not responded to the representation
by the opposition to sanction proceedings against Raja.

The final blow came after the Comptroller and Auditor General of India
said the entire process of spectrum allocation was undertaken in an
arbitrary manner and that the advise of the industry watchdog was
ignored and misused.