Spectrum issue goes back to 2008, opposition calls it $13-bn scam

Wednesday, April 28, 2010

NEW DELHI - The controversy over the award of spectrum to new players for second-generation telecom services that disrupted parliament again Wednesday dates back to 2008, which the opposition calls the mother of all scams that caused a $13 billion loss to the exchequer.

During that time, telecom licences and spectrum were awarded to new players on a first-come-first-served basis on price levels prevailing in 2001, without provisions to ensure that the companies do not dilute their shareholding.

As a result, the opposition parties said, Swan Telecom, for example, which had bought the licences for 13 circles along with the necessary spectrum for $340 million, sold a 45 percent stake soon after to the UAE’s Etisalat for $900 million.

This made its book value swell to $2 billion without having a single subscriber.

Similarly, realty major Unitech paid just $365 million as licence fee, but sold a 60-percent stake to Norway’s Talenor for $1.36 billion later, taking its valuation to nearly $2 billion, again without a single subscriber and a non-existant network.

“The government actually got one-sixth of what it would have, had it gone through a fresh auction route — a loss of Rs.100 billion (over $2 billion) to the exchequer on account of Swan and Unitech alone,” the Communist Party of India-Marxist (CPI-M) has daid.

Subsequently the matters came to such a pass that the Central Bureau of Investigation (CBI) even conducted raids on the offices of the communications ministry.

The initial conclusion of the premier investigative agency was the licences were awarded to companies on a first-come-first-served basis at the rates of 2001 without holding any competitive bidding, which raised a lot of questions.

Communications Minister A. Raja, who held the same portfolio then as well, however, has been maintaining that the licences were issued and allotment of spectrum made solely on the basis of the recommendations by the Telecom Regulatory Authority of India (TRAI).

Raja, a member of the Dravida Munnetra Kazhagam (DMK), also continued to maintain that he had followed the same procedures as his predecessors had in terms of rules and procedures and that there was no deviation at all.

The issue again surfaced Wednesday after a front-page newspaper report of a wiretap by the CBI on some conversations between a high-profile lobbyist-owner and Raja, which allegedly revealed wrongdoing in the allocation of 2G spectrum.

Filed under: Economy

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