2G spectrum scam From Wikipedia, the free encyclopedia Jump to: navigation, search The 2G spectrum scam involved politicians and government officials in India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would then use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is estimated to be 176,645 crore (US$32.15 billion), as valued by the Comptroller and Auditor General of India based on 3G and BWA spectrum auction prices in 2010.[1] However, the exact loss is disputed. In a chargesheet filed on 2 April 2011 by the investigating agency, Central Bureau of Investigation (CBI), the loss was pegged at 30,984.55 crore (US$5.64 billion)[2] whereas on 19 August 2011 in a reply to CBI, Telecom Regulatory Authority of India (TRAI) said that the govt gained over 3,000 crore (US$546 million) by giving 2G Spectrum.[2] Similarly Kapil Sibal, the Minister of communications & IT, claimed in 2011, during a press conference, that "zero loss" was caused by distributing 2G licenses on first-come-first-served basis.[3] All the speculations of profit, loss and no-loss were put to rest on 2 February 2012 when the Supreme Court of India delivered judgement on a public interest litigation (PIL) which was directly related to the 2G spectrum scam. The Supreme Court declared allotment of spectrum as "unconstitutional and arbitrary," and quashed all the 122 licenses issued in 2008 during tenure of A. Raja (then minister for communications & IT) the main official accused in the 2G scam case.[4] The court further said that A. Raja "wanted to favour some companies at the cost of the public exchequer" and "virtually gifted away important national asset."[5] The "zero loss theory" was further demolished[6] on 3 August 2012 when as per the directions of the Supreme Court, Govt of India revised the base price for 5 MHz 2G spectrum auction to 14,000 crore (US$2.55 billion), which roughly gives the value of spectrum to be around 2,800 crore (US$509.6 million) per MHz that is close to the CAG's estimate of 3,350 crore (US$609.7 million) per MHz.[7][8] The original plan for awarding licences was to follow a first-come-first-served policy to applicants. A. Raja manipulated the rules so that the first-come-first-served policy would kick in - not on the basis of who applied first for a license, but who complied with the conditions.[9] On 10 January 2008, companies were given just a few hours to provide their Letters of Intent and cheques. Those allegedly tipped off by Mr Raja were waiting with their cheques and other documents. Some of their executives were sent to jail along with the Minister himself.[9] In 2011, Time magazine listed the scam at number two on their ―Top 10 Abuses of Power‖ list (just behind the Watergate scandal).[10][11][12] Contents [hide] 1 Background 2 Parties accused of involvement o 2.1 Politicians accused o 2.2 Bureaucrats accused o 2.3 Corporate executives accused o 2.4 Film and entertainment persons accused o 2.5 Corporations accused o 2.6 Media persons' dubious role 3 Chronology of events and investigation o 3.1 2007 o 3.2 2008 o 3.3 2009 o 3.4 2010 o 3.5 2011 o 3.6 2012 4 Licenses quashed o 4.1 Telecom companies affected by cancellation of licenses o 4.2 Aftereffects of Supreme Court's verdict 5 Aircel-Maxis deal controversy 6 Response to scam 7 See also 8 External links 9 References [edit] Background India is divided into 22 telecom zones, with a total of 281 zonal licenses in the market.[13] According to the telecom policy of India, when a licence is allotted to an operator, some start-up spectrum is bundled along with it.[14] The policy does not have a provision for auctioning the spectrum.[15] In 2008, 122 new second generation (2G) Unified Access Service (UAS) licenses were given to telecom companies at the 2001 price and on a first-come-first-serve basis. As per the chargesheet filed by the Central Bureau of Investigation (CBI), several rules were violated and bribes were paid to favour certain firms while awarding 2G spectrum licenses. The audit report of Comptroller and Auditor General of India (CAG) says that several licenses were issued to firms with no prior experience in the telecom sector or were ineligible or had suppressed relevant facts.[16] In November 2007 Prime Minister of India Dr Manmohan Singh had written a letter to telecom minister A. Raja directing him to ensure allotment of 2G spectrum in a fair and transparent manner and to ensure license fee was properly revised. Raja wrote back to the Prime Minister rejecting many of his recommendations.[17] In the same month Ministry of Finance wrote a letter to Department of Telecommunications (DOT) raising concerns over the procedure adopted by it[17] but DOT went ahead with its plan of giving 2G licenses. It preponed the cut-off date to 25 September, from 1 October 2007.[17] Later on the same day, DoT posted an announcement on its website saying those who apply between 3.30 and 4.30 pm on that very day would be issued licences in accordance with the said policy.[17] Companies like Unitech & Swan Telecom got licenses without any prior telecom experience.[15] Swan Telecom got the license even though it did not meet eligibility criteria.[15] Swan got license for 1,537 crore (US$279.73 million) and then it sold 45% stake to UAE based company Etisalat for 4,200 crore (US$764.4 million).[15] Unitech Wireless, a subsidiary of the Unitech Group, got license for 1,661 crore (US$302.3 million) and later sold 60% stake for 6,200 crore (US$1.13 billion) to Norway based company Telenor.[15] Following is the list of companies who received 2G licenses during the tenure of A. Raja as Telecom Minister.[18][19] (The licenses were later quashed by Supreme Court)[20][21] Telecom regions for Number Name of which license was of license Remarks Company granted granted Haryana, Himachal Pradesh, Jammu & Adonis Projects Kashmir, Punjab, 6 Pvt. Ltd. Rajasthan, Uttar Pradesh (East) Assam, Bihar, North East, Nahan Properties Orissa, Uttar Pradesh 6 Adonis Projects, Nahan Properties, Pvt. Ltd. (East), West Bengal Aska Projects, Volga Properties, Azare Properties & Hudson Aska Projects Andhra Pradesh, Kerala, Properties were acquired by 3 Ltd. Karnataka Unitech. Unitech Infrastructure and Unitech Builders & Estates were Volga Properties Gujarat, Madhya Pradesh, 3 already subsidiaries of Unitech Pvt. Ltd. Maharashtra Group. So in 2008 Unitech had 22 Azure Properties 2G licenses. Later in the same year Kolkata 1 Ltd. Norway based company Telenor bought majority stake in the telecom Hudson company from the Unitech Group. Delhi 1 Properties Now it offers services under Uninor brand holding 22 pan India licences. Unitech Builders Tamil Nadu (including & Estates Pvt. 1 Chennai) Ltd. Unitech Infrastructures Mumbai 1 Pvt. Ltd. Bihar, Gujarat, Himachal, Pradesh, Kerala, Kolkata, Loop Telecom Punjab, Rajasthan, Uttar 21 Pvt. Ltd. Pradesh (East), Uttar Pradesh (West), West Bengal, Andhra Pradesh, Delhi, Haryana, Karnataka, Maharashtra, Orissa, Tamil Nadu (including Chennai), Assam, Jammu & Kashmir, Madhya Pradesh, North East Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, Himachal Pradesh, Jammu & Kashmir, Karnataka, Kerala, Kolkata, Madhya Datacom Operates under brand name Pradesh, Maharashtra, Solutions Pvt. 21 Videocon Telecommunications North East, Orissa, Ltd. Limited Rajasthan, Tamil Nadu (including Chennai), Uttar Pradesh (East), Uttar Pradesh (West), West Bengal, Delhi, Mumbai Madhya Pradesh, Kerala, Kolkata, Punjab, Uttar Pradesh (East), Uttar Pradesh (West), West Shyam Telelink Limited & Shyani Bengal, Andhra Pradesh, Telelink Limited operate together Shyam Telelink Delhi, Haryana, 17 with their combined 21 licenses. Limited Karnataka, Maharashtra, During late 2008 Russia based Orissa, Tamil Nadu group Sistema bought majority (including Chennai), stake in the telecom company and Assam, Jammu & now they operate under brand name Kashmir, North East MTS India. Shyani Telelink Mumbai, Bihar, Gujarat, 4 Limited Himachal Pradesh Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala, Maharashtra, In 2008, Swan Telecom merged Swan Telecom Punjab, Rajasthan, Tamil itself with Allianz Infratech (P) Ltd. 13 Pvt. Ltd. Nadu (including Chennai), During late 2008 Abu Dhabi's Uttar Pradesh (East), Uttar Etisalat bought about 45 percent of Pradesh (West), Delhi, the company and renamed it to Mumbai Etisalat DB Telecom Allianz Infratech Bihar, Madhya Pradesh 2 (P) Ltd. Assam, Punjab, Karnataka, Idea Cellular bought Spice Jammu and Kashmir, Communications Ltd. in 2008 for an Idea Cellular North East, Kolkata, West 9 amount of 2,700 crore (US$491.4 Bengal, Orissa, Tamil million).[22] So out of 122 spectrum Nadu (including Chennai) licenses sold in 2008 Idea Cellular owns 13 licenses. However of the Spice Delhi, Andhra Pradesh, 13 licenses, only 7 of the licenses Communications 4 are in use by the company and the Haryana, Maharashtra [23] Ltd. rest are overlapping licenses. In January 2009, Bahrain Telecommunications signed a deal Assam, Jammu and with S Tel to buy 49% shares in S Kashmir, Orissa, North Tel for $225 million. C S Tel 6 East, Bihar, Himachal Sivasankaran owns the remaining Pradesh (51%) share.[24][25] In May 2009, Sahara Group bought 11.7% stake in S Tel[26] In late 2008 promoters of Tata Teleservices sold 26% equity stake to a Japanese telecom giant NTT Jammu and Kashmir, Tata Teleservices 3 Docomo for about 13,070 crore Assam, North East (US$2.38 billion) or an enterprise value of 50,269 crore (US$9.15 billion).[27] [edit] Parties accused of involvement The selling of the licenses brought attention to three groups of entities – politicians and bureaucrats who had the authority to sell licenses, corporations who were buying the licenses and media professionals who mediated between the politicians and the corporations.