Spectrum vortex
The controversy over new service licences and allotment of spectrum for
second-generation mobile telephony has claimed the telecom minister's
job. But this is not the end of the scandal.
The comment from Justice Asok Kumar Ganguly was telling. "The Prime Minister could have said that the material on record was insufficient and declined sanction but he could not have sat over the complaint for 16 months," the Supreme Court judge asked in response to the complaint raised by Janata Party leader Subramanian Swamy on the 2007 allocation of mobile spectrum for additional operators for second-generation, or 2G, mobile networks.
But the denouement of what is now known as the "Spectrum Scam" is still quite a way off. The media has climbed all over the valuation of the scam at Rs 176,000 crore by the Comptroller and Auditor General (CAG) of India in a report tabled in the Lok Sabha on November 16. The Telecom Regulatory Authority of India, or TRAI, went a step further on November 18 to recommend that the government cancel 69 licences granted to six phone operators. Most of them had received the licences when Andimuthu Raja was the Communications Minister but have not rolled out networks as promised.
On November 14, at 11 that Sunday night, the 47-year-old Raja submitted his resignation. And, earlier, on a Friday evening flight from Seoul to New Delhi, returning from the G20 Summit, a Business Today correspondent noted that Singh looked irritated and upset when asked about Raja. He fobbed the question off by saying that the matter was "sub-judice".
The roots of what is being called India's biggest scam are well known. In September 2007, the telecommunications ministry, then under fire for delays in conducting the auction of third-generation (3G) mobile spectrum, auctioned additional licences for 2G mobile operators and allocated additional spectrum. The companies acquired what are called Unified Access Service Licences by paying just Rs 1,651 crore - the price determined in 1999, when demand for mobile telephony was a fraction of what it was in 2007. The bureaucrats in the ministry also changed processes midway and advanced the closing date for filing of submissions.
Two beneficiaries named in the CAG report are Swan Telecom and Unitech. Within a few weeks of the auction and without installing a single tower or getting a single subscriber, both sold stakes to international operators - Swan to Etisalat of the United Arab Emirates and Unitech to Norway's Telenor - taking their valuations closer to Rs 10,000 crore each. This arbitraging with radio spectrum - which belongs to the public - clearly showed the colossal loss to the exchequer.
However, some of the calculations used by CAG can be questioned. Even though TRAI equated 2G spectrum as being equal to 3G spectrum, 3G technology is far more efficient as a voice medium, easily carrying twice the voice traffic possible on 2G. And as a data medium, there is no comparison as 3G is easily 25 times more efficient than 2G. Another factor the CAG report used to derive its calculations was a presumptive offer of Rs 13,752 crore made by Chennaibased S-Tel for 6.2 megahertz of pan-India 2G spectrum in December 2007 in a letter to the Prime Minister. Using this figure, the notional loss to the exchequer is estimated at Rs 65,000 crore, which is a more plausible sum - but Rs 176,000 crore made for better copy.
The CAG has questioned the ownership pattern of Swan Telecom, noting that Reliance Communications, controlled by the Anil Ambaniled Reliance ADA Group, had a large stake in the company. TRAI rules prohibit an existing operator from owning more than 10 per cent in another operat o r. Meanwh i l e, the Enforcement Directorate is investigating the role played by a corporate lobbyist.
The CAG report also castigates existing operators such as Bharti Airtel and Vodafone Essar for holding excess spectrum without having paid market rates. It questions the alacrity with which the TRAI and the ministry changed their rules for dual-use spectrum. Operators using CDMA (short for code division multiple access) technology were allowed to migrate to the more popular global system for mobile, or GSM, communications networks - Reliance Communications and Tata Teleservices in this case. Some telecom industry watchers such as Mahesh Uppal, Director, Com First India, an industry consultancy, believe that the licences should be withdrawn and a new auction held.
The scandal, meanwhile, has cast a long shadow over politics in Tamil Nadu, a state that accounts for 40 members of the 544-member Lok Sabha. The pressure from the Congress, which leads the United Progressive Alliance coalition, for Raja's resignation is a rude shock for M. Karunanidhi, leader of the Dravida Munnetra Kazhagam party.
With assembly elections in the state scheduled for April 2011, the party could have done well without the scandal and Raja's resignation. As the matter winds through courts and Parliament, this could be another scandal that leaves the citizen no wiser. Kapil Sibal, the Human Resource Development minister, has been given additional charge of the communications ministry and some are hoping that he can sort the mess out. Given the complicated state of telecom regulations, that may be easier said than done even for Sibal, a lawyer by training.
What one can be certain about is that a bungling of spectrum policy in India will definitely lead to more call drops and poor quality in the days ahead.
But the denouement of what is now known as the "Spectrum Scam" is still quite a way off. The media has climbed all over the valuation of the scam at Rs 176,000 crore by the Comptroller and Auditor General (CAG) of India in a report tabled in the Lok Sabha on November 16. The Telecom Regulatory Authority of India, or TRAI, went a step further on November 18 to recommend that the government cancel 69 licences granted to six phone operators. Most of them had received the licences when Andimuthu Raja was the Communications Minister but have not rolled out networks as promised.
On November 14, at 11 that Sunday night, the 47-year-old Raja submitted his resignation. And, earlier, on a Friday evening flight from Seoul to New Delhi, returning from the G20 Summit, a Business Today correspondent noted that Singh looked irritated and upset when asked about Raja. He fobbed the question off by saying that the matter was "sub-judice".
The roots of what is being called India's biggest scam are well known. In September 2007, the telecommunications ministry, then under fire for delays in conducting the auction of third-generation (3G) mobile spectrum, auctioned additional licences for 2G mobile operators and allocated additional spectrum. The companies acquired what are called Unified Access Service Licences by paying just Rs 1,651 crore - the price determined in 1999, when demand for mobile telephony was a fraction of what it was in 2007. The bureaucrats in the ministry also changed processes midway and advanced the closing date for filing of submissions.
Two beneficiaries named in the CAG report are Swan Telecom and Unitech. Within a few weeks of the auction and without installing a single tower or getting a single subscriber, both sold stakes to international operators - Swan to Etisalat of the United Arab Emirates and Unitech to Norway's Telenor - taking their valuations closer to Rs 10,000 crore each. This arbitraging with radio spectrum - which belongs to the public - clearly showed the colossal loss to the exchequer.
However, some of the calculations used by CAG can be questioned. Even though TRAI equated 2G spectrum as being equal to 3G spectrum, 3G technology is far more efficient as a voice medium, easily carrying twice the voice traffic possible on 2G. And as a data medium, there is no comparison as 3G is easily 25 times more efficient than 2G. Another factor the CAG report used to derive its calculations was a presumptive offer of Rs 13,752 crore made by Chennaibased S-Tel for 6.2 megahertz of pan-India 2G spectrum in December 2007 in a letter to the Prime Minister. Using this figure, the notional loss to the exchequer is estimated at Rs 65,000 crore, which is a more plausible sum - but Rs 176,000 crore made for better copy.
The CAG has questioned the ownership pattern of Swan Telecom, noting that Reliance Communications, controlled by the Anil Ambaniled Reliance ADA Group, had a large stake in the company. TRAI rules prohibit an existing operator from owning more than 10 per cent in another operat o r. Meanwh i l e, the Enforcement Directorate is investigating the role played by a corporate lobbyist.
The CAG report also castigates existing operators such as Bharti Airtel and Vodafone Essar for holding excess spectrum without having paid market rates. It questions the alacrity with which the TRAI and the ministry changed their rules for dual-use spectrum. Operators using CDMA (short for code division multiple access) technology were allowed to migrate to the more popular global system for mobile, or GSM, communications networks - Reliance Communications and Tata Teleservices in this case. Some telecom industry watchers such as Mahesh Uppal, Director, Com First India, an industry consultancy, believe that the licences should be withdrawn and a new auction held.
The scandal, meanwhile, has cast a long shadow over politics in Tamil Nadu, a state that accounts for 40 members of the 544-member Lok Sabha. The pressure from the Congress, which leads the United Progressive Alliance coalition, for Raja's resignation is a rude shock for M. Karunanidhi, leader of the Dravida Munnetra Kazhagam party.
With assembly elections in the state scheduled for April 2011, the party could have done well without the scandal and Raja's resignation. As the matter winds through courts and Parliament, this could be another scandal that leaves the citizen no wiser. Kapil Sibal, the Human Resource Development minister, has been given additional charge of the communications ministry and some are hoping that he can sort the mess out. Given the complicated state of telecom regulations, that may be easier said than done even for Sibal, a lawyer by training.
What one can be certain about is that a bungling of spectrum policy in India will definitely lead to more call drops and poor quality in the days ahead.
Scam calls Sukh Ram  Pramod Mahajan  Andimuthu Raja |
