Today there is much talk about 2G as India's IT and Telecom minister A.

Raja putting his papers over the alleged scam in the 2G spectrum allocation. Here is a flash back on what 2G is all about and the scam involving it: The second generation 2G cellular telecom networks were commercially launched on the GSM standard in Finland in 1991.2G has been superseded by newer technologies such as 2.5G, 2.75G, 3G, and 4G; however, 2G networks are still used in many parts of the world.

2G spectrum
It is a spectrum which supports 2G technology. High bandwidth is required for this purpose. 2G means second-generation wireless telephone technology. Three primary benefits of 2G networks over their predecessors were that phone conversations were digitally encrypted; 2G systems were significantly more efficient on the spectrum allowing for far greater mobile phone penetration levels; and 2G introduced data services for mobile, starting with SMS text messages. 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 license for second generation (2G) mobile phone services at Rs.1,658 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 2010 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-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 license fee but sold a 60percent 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.

Trial in the court

A trial court put on trial the first set of officials and businessmen indicted in the country's biggest corruption case, a multi-billion dollar telecoms scandal that has weakened the government and put off some foreign investors. The graft scandal is one of several to have emerged in the past few months, tarnishing the reputation of Prime Minister Manmohan Singh, whose government has gone on the defensive against an emboldened opposition. While corruption itself has been largely shrugged off by investors, the regulatory uncertainty from the review of past government decisions is a source of concern to investors. Present at the hearing are former telecoms minister Andimuthu Raja

as well as officials from the Indian joint ventures of Norwegian telecoms firm Telenor and the United Arab Emirates' Etisalat. Three executives from Reliance ADA, owned by Anil Ambani, are also on trial in the case which police investigators said involved awarding companies valuable telecoms licenses at rock-bottom prices. State auditor CAG estimates the scam to have cost the government up to $39 billion in lost revenue. Here are some questions about the scandal: WHAT IS THIS ALL ABOUT" CBI say that millions of dollars were paid in bribes to ensure favors for certain firms in 2007/08 when the government issued 122 new licenses to offer mobile phone services in the world's fastest growing telecoms market. The state auditor estimated the government may have lost up to $39 billion in revenue -- equivalent to the defense budget -- due to violations during the allocation process. Several licenses were issued to firms who were ineligible, or who had no prior experience in the sector, or who had hid material facts while applying, the auditor said. The telecoms ministry's process of issuing licenses "lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner," the auditor said. WHAT ARE THE CHARGES" CBI have charged the accused of cheating, conspiracy and other crimes. The accused include Sanjay Chandra, the managing director of Telenor's India partner Unitech and Shahid Balwa, the vice chairman of Etisalat's India operations. Raja, former telecoms minister, is also accused of taking bribes to favor the local partners of Telenor and Etisalat. CBI say the bribes were routed through a television channel run by Raja's DMK party, a key member of the ruling coalition led by the Congress. All the accused deny any wrongdoing. Telenor and Etisalat say the events described occurred before they invested in India. WHAT IS THE FALLOUT" The scandal has tarnished the Congress-led government's image, spooked investors and has led to the Norwegian prime minister writing to his Indian counterpart seeking "fair treatment" for Telenor. Prime Minister Manmohan Singh was reprimanded by the Supreme Court for not acting quickly enough against Raja and the opposition all but shut down an entire parliament session demanding a special cross-party probe. The government gave in to that demand. A separate parliamentary committee is also investigating the graft scandals. One of those panels summoned Ratan Tata and Anil Ambani to answer questions on the license allocations. The telecoms

ministry is considering whether to cancel 85 licenses issued in 2008, including those held by Telenor and Etisalat. WHAT DOES THIS MEAN FOR INVESTMENT IN INDIA" Regulatory uncertainty is worrying investors, as so many business deals are being investigated and there is the possibility that some may be scrapped. This concern has hit the BSE Sensex, which ended the March quarter as the world's worst performer. If the telecoms ministry does decide to cancel some or all of the 85 licenses it is scrutinising, questions will be raised over whether foreign investors can trust government contracts. Norway's prime minister has said Telenor should not be penalised for "errors others have committed in India." It is early to say whether licenses will be cancelled, but pressure will be on the government not to do so because operators have invested millions of dollars in rolling out networks and cancelling them will inconveanience subscribers.

Avinash Kumar