What is the 2G scam all about


New Delhi : Following is a primer on the second-generation spectrum allocation scandal that resulted in former communications minister A. Raja of DMK being arrested here Tuesday:

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The issue dates to 2008 when nine telecom companies were issued scarce airwaves, a national resource, and licences for 2G mobile phone services at Rs.1,658 crore (less that $350 million) for a pan-India operation. As many as 122 circle-wise licences were issued.

The opposition said by giving airwaves cheap and in a controversial manner of first-cum-first-served basis, the exchequer had lost billions of dollars. It also objected to the arbitrary advancement of the cut-off date for filing applications to suit some firms.

But Prime Minister Manmohan Singh himself defended Raja’s decision and said May 24 last year that his communications minister had done no wrong and had only implemented the policy that was already in place. No norm wasn flouted, he added.

The opposition nevertheless stepped up its attack with two examples on 2G spectrum sale:

– A new player, Swan Telecom, bought licences for 13 circles with the necessary spectrum for $340 million but managed to sell a 45-percent 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 licence fee but sold a 60-percent 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 Bahrain Telecom. The other companies are Tata Tele, Idea Cellular, Loop Telecom, Shyam Telelink and Spice.

The isue cropped up again after auction of airwaves for third-generation (3G) services that fetched nearly $15 billion and for broadband access, which fetched over $8.5 billion to the exchequer. Accordingly the the notional loss on 2G was estimated at $12.8 billion to $38 billion.

This estimate was arrived at by the Compteoller and Auditor General of India and leaked to some sections of the media, forcing Raja to regisn Nov 5 from the union council of ministers holding the communications and IT portfolio.

The official auditor also said the entire process of spectrum allocation was undertaken in an extremely arbitrary manner and that the advise of industry watchdog, Telecom Regulatory Authority of India (TRAI), was ignored and misused.

Meanwhile, Janata Party leader Subramanian Swamy filed a suit in the Supreme Court seeking judicial intervention in giving directions to the government and probe agencies to act against Raja.

Acting on the petition, the Supreme Court had asked the solicitor general last October why Prime Minister Manmohan Singh had not responded in a timely manner to a request by Swamy to sanction proceedings against Raja.

Then in December, the apex court itself decided to monitor the probe, that was being conducted by multiple agencies, including the CBI and the Enforcement Directorate. The agencies have to submit their respective reports to the apex court by Feb 10.