A Report on Contemporary Issue

2G SPECTRUM SCAM In partial fulfillment for the degree of MASTER OF BUSINESS ADMINISTRATION

2010 2012 Submitted to:Miss. Khushboo Sharma Submitted by:Purnima Shukla

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CERTIFICATE
To whom so ever it may concern that this is to certify that project entitled

2G SPECTRUM SCAM submitted by Miss. Purnima Shukla of

M.B.A. (Second sem. 2011),in the partial fulfillment of the requirement for the award of the degree

MASTER OF

BUSINESS

ADMINISTRATION of is a record of her own work carried out by her

under my guidance.

Supervised by:Ms. Khusboo Sharma (Faculty of Human Resourse) Department C.I.I.T.M. - JAIPUR Date:-

Forwarded to :Proff. K.C. Gupta Sir H.O.D. of M.B.A.

C.I.I.T.M. -Jaipur Date:-

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ACKNOWLEDGEMENT
It gives me immense pleasure in acknowledging the valuable assistance and co-operation. I received from the people around me for the successful completion of my project report. I earnestly express my gratitude to our able and competent faculty guide Ms. Khusboo Sharma Faculty, CIITM, Jaipur. Her support and full-fledged guidance, encouragement and valuable suggestion were instrumental in making this report. Completing this project report would not have been possible without active assistance of my honorable faculties with whom I was working despite their busy schedule. All of them were quite generous to devote time and energy in answering my queries, solving my problems and passing me valuable amount of Knowledge towards my study of 2G SPECTRUM SCAM" Thanks are also to my family, friends, and colleagues who were with me through all times and egged me on towards accomplishing this project objective.

PURNIMA SHUKLA
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Date: -

TABLE OF CONTENT
1)Introduction 2G Spectrum 2G Scam 2)2G Spectrum Scam Amount involved Flow of events 3)People involved in 2G Scam Politicians Corporate houses Government Officials Media Persons
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4)Investigating Agencies CAG CAG Report 5)Actions taken after scam 6)Conclusion 7)Bibliography

INTRODUCTION
India is considered as one of the most corrupted nations in the world. The list of scandals and scams is so long that it will require a big book to mention all of them. The common people have lost its faith in the government system and politicians. Even the judiciary board is not free from scandals. In the last month a scam surfaced regarding judiciary bodies taking bribes of multi million to favor judgment in the court. It is a well known fact that politicians take large amount of money in the form of bribe to pass tenders and contracts of various businessmen in India. The latest addition to the list of scams and scandals in India is 2 G Spectrum scam. It is estimated that the Indian Government lost around Rs. 1.76 Lakh crore because of this scam. The telecom minister of India Mr. A Raja has been allegedly overlooked all the procedures and formalities to issue licenses to private telecom companies. During this period the numbers of cell phone customers shoot up to 350 million
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from 4 million in the span of just seven years. This sudden increase in

the number of cell phone users in such a short span of time gathered the attention the Indian Government.

What is 2G spectrum? Limitations of 2G spectrum.

What is 2G spectrum?
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2G is the second generation and spectrum means radio waves. 2G spectrum is the radio waves which support radio waves. It is wireless telephone technology and it is started in 1991 in Finland for the first time. Special features of 2G spectrums are: 0G and 1G are having only analog output. 2G means digital quality and with the help of 2G spectrum, phone conversations are encrypted into digital form. 2G services had given the opportunity to exploit the mobile phone services. Usage of text messages was started with 2G spectrum only.

Introduction of data services

Mobile advertising was also introduced Ringtones were downloaded and paid for Safe for the use means security level was high Environmental condition was very good for this network,and no network shortage was there

Limitations of 2G spectrum:
2G spectrum requires high bandwidth and the bandwidth is limited. Mobile connections and internet connections are given by dividing the bandwidth in mega hertz. This is the important part in exploiting the business. Services can be started only there is a minimum bandwidth of 6.2 MHz.
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Changes in the telecom industry:

There are many generations after 2G which are 2.5G, 3G and 4G spectrums. Telecom industry had given the 3G lines to the service providers after auction. There have been many changes in the Indian telecom services in 1994 when Indian telecom process is defined. This gave an opportunity for the private industries. The process which is declared in 1999 is very important and according to this, service providers should pay annual license charges and spectrum charges in the form of their profits to central government. In 2003, United Access Services had defined the process of license. 2G spectrum is defined according to this process only.

2G SPECTRUM SCAM (THE BIGGEST SCAM)

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We have had a number of scams in India; but none bigger than the scam involving the process of allocating unified access service licenses. At the heart of this Rs. 1.76-lakh crore worth of scam is the former telecom Minister A Raja- who according to the CAG, has evaded norms at every level as he carried out the dubious 2G license awards in 2008 at a throw-away price which were pegged at 2001 prices.

WHAT IS 2G SPECTRUM SCAM?

The Union Minister of Telecommunications Mr. A. Raja, now being popularly known as SPECTRUM Raja has become a famous personality overnight. The Spectrum Scandal which has cost the government more than rupees 1 lakh crore is supposed to be the biggest scam the country has ever seen. The Ministry of Telecommunications held by Raja is in charge for the allocation of Spectrum to the companies which offer mobile phone services in the country. In the year 2008, 2nd generation (2G) Spectrum for GSM service providers was allotted to the private players. There were a lot of controversies in the way Spectrum allocation took place by 2008 itself, now the ministers office is being raided by the CBI for further investigation. The Minister claims that there is no truth in the allegations against him; he says that whatever procedure was followed in the year 2001 has been adopted by him as well. But there were mere 50 lakh subscribers in the year 2001 compared to 37.5 crore mobile phone users by the
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end of March 2008; there has been an exponential growth in the Mobile Market which is known to all of us. The fact that the market has grown by leaps and bounds in between 2001 and 2008 is unquestionable. In the year 2001 the government was shouldering the responsibility to nurture the mobile services market, therefore the Spectrum license was not auctioned then. Even the private players in the industry would not have anticipated such a colossal growth in the mobile services market. The Government was then in a position to motivate and attract private players to operate in the mobile services space. But that is not the case in 2008. Both domestic as well as MNC players consider investing in Telecommunications extremely profitable. In this sort of a scenario if the government decides to fix the same price, following the same procedure as it did in the year 2001 then it would be a deliberate attempt to put too small a price for the 2G spectrum. The Telecom Regulatory authority of India (TRAI) is a statutory body found by the government of India in 1995 to avoid excessive government interference in pricing and policy. The TRAI had advised the Telecom ministry to auction the Spectrum License in the years 2001, 2003, 2007 respectively. But the Telecom ministry held by Raja had completely neglected TRAIs recommendations and allotted the 2G spectrum license on first come first serve basis. More than that fact, Mr. Mishra (TRAI - Head) in his letter dated 14th Jan 2008 to the Telecom Ministry had clearly pointed out that the Ministry has ignored all the crucial recommendations of TRAI and considered a few points
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for name sake.

The last date to submit applications for 2G spectrum was announced as 1st October 2007 by the ministry as on 24th September. Later an artificial cut-off date, Sep 25, 2007, was created and applications received between Sep 25 and Oct 1 were summarily rejected. (This in itself is a clear violation of TRAIs guidelines). Datacom Solutions, Yestel, Shyam Telelink, Loop Telecom, Spice, Idea Cellular, Tata Teleservice, Swan and Unitech were given license for 2G Spectrum. The total fee generated by the government for selling license to the above 9 companies is 10, 772.68 crore. Out of the companies mentioned above, the two companies Swan and Unitech do not have any prior experience in the business of mobile phone, broadband or related services. Swan Telecom has obtained Spectrum license to operate in 14 circles for an amount of 1537.01 crore while Unitech has obtained license to operate in 22 circles by paying 1651 crore respectively. Within a matter of six months these two companies have sold majority of their stake to foreign companies. Swan Telecom had sold 45% of its shares for a whopping amount of 4050 Crore to a company called Etisalat which is based out of UAE due to which the valuation of Swan Telecom had increased to Rs. 9990.56 crore. Unitech had sold 60% of its stares to a Norway based company Telenor for Rs. 6120 crore due to which the valuation of Unitech had increased to a monstrous amount of 10, 731 crore. Just by leveraging their ability to acquire Spectrum license, Swan and Unitech had made massive 700% return on their
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investment within a matter of six months.

Rajas ministry made Rs. 10,772.65 crore by selling 2G license to 9 companies whereas Swan and Unitech just by selling half of their stake had proved the fact that their license is worth more than 20,000 crore. If we consider the market value of these two companies, the Government by selling license to these nine companies should have generated 70, 022.42 crore as license fee. In that way our country has incurred a loss of over Rs. 60, 000 crore. The Central Vigilance had written a letter to the Telecom Department stating the irregularities in allocation of 2G Spectrum as on 15th of December 2008. It had clearly mentioned that it is highly disappointed with the way 2G Spectrum was licensed. Even after that, Raja while answering to a question in Parliament had told that 2G Spectrum was allotted on first come first serve basis; he had also mentioned that neither TRAI nor the Vigilance had raised objections, which is against truth. TRAI head Mr. Mishra had clarified in an interview (December 2008) that nowhere in the guidelines or recommendations of TRAI it had mentioned that Spectrum needs to be allotted on first come first serve basis. The Chief of the Central Vigilance Mr. Prathyush Sinha had told in an interview (April 2009) that it is evident that there have been severe irregularities in 2G Spectrum allocation.Despite all misshapes the Congress party, Prime Minister and the Finance Minister are trying to hold up the Telecom Minister A. Raja due to political pressure from the DMK which is obvious. In fact Raja has said on record that
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whatever he has done has been discussed and in consent with the

Prime Minister. This very fact is even more shocking than the scam in itself.

HOW WAS 2G SCAM KNOWN?

The issuing of the 2G licenses occurred in 2008, But scam came to public notice when the INDIAN INCOME TAX DEPARTMENT investigated political Lobbyist NIIRA RADIA.

At the same time the Supreme Court of India took Subramaniam Swami complaints on report.

WHAT IS THE AMOUNT OF SCAM INVOLVED?

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Based on the subsequent auction of airwaves for third generation (3G) services, which fetched nearly Rs. 63,000 Crore, and that for broadband access, which fetched over Rs.35,700 Crore, the national loss to the exchequer due to under pricing of 2G spectrum was estimated by the CAG to be a whopping Rs. 176000 crore!!

The procedures to provide license were violated

The violation of procedures and formalities before issuing licenses can be listed as below: TRAI ( Telephone Regulatory Authority of India ) had recommended the 2 G Spectrum licenses would be auctioned at the market price
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The license rule were changed several times in the middle

 The last date for submission of applications advanced by a week Licenses were given on a first-come-first-served basis without caring about the procedures and policies There was no proper process for auction and bid Raja turned a deaf ear to the advices of TRAI, Law Ministry, Finance Ministry

Favours done to some ineligible candidates.

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FLOW OF EVENTS
A Raja beomes Union minister of communication and IT on May 16, 2007.

Without cabinet approval Raja allots Cross Technology to R com,Tata Teleservices and shyam Telecom in October 2007 at a rate fixed in 2001.

On September 24, 2007 DoT issues a press release inviting applications for issue of spectrum.

Objections from the Telecom Secreatary, D S Mathur and member of DoT Manju Madhvan on the point of transparent auctioning and competitive bidding.

Law minister HR Bhardwaj rejects Rajas plan. Directs to constitute an Empowered Group of Ministers (eGoM) to form transparent procedures for 2G spectrum allocation and new licenses.

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Reversal of cut off dates by issuance of press release by DoT(jan 10, 2008) at 2:45 PM. The press release asked the new players to remit fee( huge money ranging from Rs.1500 1600 Crore) between 3:30 4:30 PM on same day.

On Sept 13, 2008, Raja forces BSNL CMD Kuldip Goyal to enter into a un-precedented MoU with Swan. Offloading of Shares: 1. Swan offloads 45% shares to UAE based Etisalat for Rs. 4500 crore (Swan got licenses for Rs.1530 Cr.). 2. Unitech offloads 60% of shares to Norway based Telenor for Rs. 6200 Cr. (Unitech got licenses for Rs. 1621 Cr.)

Delhi HCs PIL hearing against FCFS policy.

STel files case against DoT in the Delhi HC against the reversal of cutoff dates.

CBI & ED file FIR and star probing the spectrum scam.

Hearing of cases field in Supreme Court by subramaniam Swamy and Prashant Bhushan started.

Raja finally submits resignation on November 14,2010.

The CAGs report in Parliament on November 16, 2010 finding a presumptive loss up to Rs. 1.76 lac Crore.

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WHO ARE ALLEGEDLY INVOLVED IN 2G SCAM?

The 2G spectrum scam involved officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. Collected from 2G licenses, the loss to the exchequer was 176,379 crore (US$38.2According to a report submitted by the Comptroller and Auditor General(CAG) based on money 7 billion). The issuing of the 2G licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department investigated political lobbyist Niira Radia and the Supreme Court of India took Subramaniam Swamys complaints on record. In 2008, the Income Tax department, after orders from the ministry of Home and the PMO, began tapping the phones of Niira Radia. This was done to help with an ongoing investigation into a case where it was alleged that Niira Radia had acted as a spy. Some of the many conversations recorded over 300 days were leaked to the media. The intense controversy around the leaked tapes became known in the media as the Radia tapes controversy. The tapes featured
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some explosive conversations between Politicians, Journalists and Corporate Houses. Politicians from Karunanidhi to Arun Jaitley, journalists like Barkha Dutt and Vir Sanghvi and Industrial groups like the Tatas were either participants or mentioned in these explosive tapes.

POLITICIANS INVOLVED ARE:

A. Raja

(One of the main person behind the indias largest Corporate Fraud)
Andimuthu Raja(A. Raja) born in may 10, 1963, Perambalur, Tamil Nadu, India. He is an Indian politician from the Dravida Munnetra Kazhagam (DMK) political party. He is member of the 15th Lok Sabha representing the Nilgiris constituency of Tamil Nadu. Raja was first elected to the Lok Sabha in 1996 and first served as minister of State
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form 1999 to 2003. On being

re-elected to the Lok Sabha in 2004,

he became a cabinet minister in the UPA government. In 2007, he became cabinet minister for communication and information technology. On being re-elected in 2009 he was again appointed cabinet minister for communication and information technology until being tained in the 2G spectrum scam and resigning in 2010.

WHAT ARE THE CHARGES ON FORMER TELECOM MINISTER A RAJA? CHEAP TELECOM LICENSES Entry fee for spectrum licenses in 2008 pegged at 2001 prices

Mobile subscriber base had shot up to 350 million in 2008 from 4 million in 2001.

NO PROCEDURES FOLLOWED Rules changed after the game had begun Cut-off date for applications advanced by a week Licenses issued on a first-come-first-served basis No proper auction process followed, no bids invited Raja ignored advice of TRAI, Law Ministry, Finance Ministry TRAI had recommended auctioning of spectrum at market rates FAVOURITISM, CORPORATES ENCASH PREMIUM
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Unitech, Swan Telecom got licenses without any prior telecom

experience Swan Telecom given license even though it did not meet eligibility criteria Swan got license for Rs. 1537 crore, sold 45% stake to Etisalat for Rs. 4200 crore Unitech Wireless got license for Rs. 1661 crore, sold 60% stake for Rs. 6200 crore

All nine companies paid DoT only Rs. 10,772 cr. for 2G licences.

When A. Raja Arrested?

Raja arrested on Feb 2nd 2011.(Behura and Chandolia also arrested on this date)

Arun Shourie
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Arun Shourie, the minister for Telecom during 2003 in the previous BJP regime. It was Arun Shourie who introduced the controversial technology neutral Unified Access License, which allowed fixed line operators who had paid much lower license fees to offer mobile phone services, at first in the limited WLL mode (Wireless local loop) and later, following an out of court settlement between mobile operators and the BJP government, full mobility. This gave an advantage to players like Reliance and Tata Teleservices who managed to get mobile spectrum without paying the hefty fees that earlier operators like BPL Mobile had paid.

Pramod Mahajan

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Pramod Mahajan, the minister for Telecom between 1999 and 2003. Mr. Mahajan was the minister when the BJP Government took the controversial decision to shift from a license fee based regime to a revenue sharing model which was roundly condemned both by political parties and by economic experts. The Comptroller and Auditor General also filed adverse reports citing a loss of over Indian Rupee 64,000 crore (US$13.89 billion) caused by this decision. The crux of A. Rajas defence is that he was following a policy of 2G allocations put in place by the BJP and it would be unfair to levy prices based on 3G spectrum to 2G licenses. Pramod Mahajan, who was seen to be friendly with various corporate houses, had been brought in to replace Jagmohan as Telecom minister just days before the decision was announced. The biggest beneficiary of this abrupt shift in policy was Reliance Info com who gained thousands of crores of spectrum without paying a dime in additional license fees. Pramod Mahajan and his cronies are reported to have received benami shares of Reliance Industries as a gift.

Kanimozhi

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In November 2010 Outlook published transcripts of six conversations between lobbyist Niira Radia and Kanimozhi from May 2009.India Today claims that these conversations reveal that Kanimozhi filtered the information flowing to her father (the Chief Minister of Tamil Nadu) and thereby "tipped the scales in favour of" A. Raja, who was Minister of Communications and Information Technology during controversial 2G wireless spectrum allocations in 2008. On March 11, 2011, Kanimozhi was questioned by the Central Bureau of Investigation at the DMK headquarters in Chennai, in relation to an apparent flow of over Rs.200 crore from Shahid Balwa's DB Realty firm to Kalaignar TV, the regional Tamil channel in which Kanimozhi is alleged to have a 20 percent stake. The CBI has included Kanimozhi's name in the second chargesheet of the 2G scam in relation to an apparent flow of over Rs.200 crore.

Manmohan Singh
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The lawyer for Swan Telecom promoter Shahid Usman Balwa, chargesheeted in the 2G spectrum scam and told a Delhi court that the CBI should have named Prime Minister Manmohan Singh as one of the witnesses in the case.

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CORPORATE HOUSES

Unitech Group a real estate company entring the telecom industry with its 2G bid; sold 60% of its company stake at huge profit to Telenor after buying licensing (Including land values properties for towers)

Swan Telecom sold 45% of its company stake at huge profit to Emirates Telecommunications Corporation (Etisalat) after buying licensing.

Loop Mobile Videocon Telecommunication Limited S Tel Reliance Communications Sistema Shyam Mobile (MTS)- Sistema Mobile Russia Tata Commuunications Vodafone Essar Dishnet Wireless Allianz Infra

CORPORATE PERSONALITIES INVOLVED

Anil Ambani- Reliance Group (ADAG)
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Shahib Balwa- DB Realty and DB Etisalat (formerly swan Telecom)

Prashant Ruia- Essar group.

GOVERNMENT OFFICIALS

SIDDHARTHA BEHURA : former telecom secretary who served in the DOT at the time of the 2G allocation.

PRADIP BAIJAL : a bureaucrat who is alleged to have implemented policies that favored certain Telecom companies when he was heading the TRAI.

R K CHANDOLIA : private secretary of Raja during UPA-I when the licences were awarded. .When Raja became the Telecom Minister once again in UPA-II, Chandolia had been promoted
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to the Joint Secretary rank.

MEDIA PERSONS INVOLVED

AND

LOBBYISTS

Nira Radia, a former airline entrepreneur

turned corporate lobbyist whose conversations with politicians and corporate entities were recorded by the government authorities and leaked creating the Nira Radia tapes controversy.

Barkha Dutta, an NDTV journalist alleged to

have lobbied for A. Rajas appointment as minister.

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Vir Sanghvi, a Hindustan Times editor alleged

to have edited articles to reduce blame in the Nira Radia tapes.

PETITIONERS IN 2G SCAM TO Supreme Court

Subramaniam swami, activist lawyer and politician Paranjoy guha thakurta,A journalist who was one among the very first to write on the irregularaties in the awarding of 2g spectrum allocation by the telecom ministry.

Prashant Bhushan,On behalf of THE CENTRE FOR PUBLIC INTEREST LETIGATION.

Ratan Tata petitions over tape leak:The tape leaked to the public include conversations between Nira Radia and Ratan Tata.Tata petitioned the government to acknowledge his right to privacy and demanded accontability for the leak,with the Minister of home affairs,CBI,Income Tax Department,Department of telecommunication and Department of Information and Technology as
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respondents in the petitions.

INVESTIGATING AGENCIES

COMPTROLLER & AUDITOR GENERAL OF INDIA (CAG)

CENTRAL BUREAU OF INVESTIGATION (CBI)

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CENTRAL VIGILANCE COMMISSION (CVC)

DIRECTORATE OF ENFORCEMENT (DE)

CAG REPORT
WHAT IS CAG ? The CAG is a typical file-based government auditing agency. It stresses on reporting deviations from set procedures and policies and fails to recognise that the deviations have resulted in speeding up economic growth. REPORT OVERVIEW: 2g licenses at throw away prices Rules bent,no procedure followed,cut-off date advanced No aution,no bid .First come-first served basis Swan telecom licenses:- Rs.1537 crore.Sold 45% stake:Rs.4200 crore
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Unitech Wireless licenses:-rs.1661 crore,Sold 60% stake:-

Rs.6200 crore Mobile subscriber base 2001: 04 million 2008:350 million Revenue loss:- Rs.1.76 lakh crore Lisences issued in 2008 pegged in 2001 prices Law Ministry,Finance Ministry,TRAI adviced ignored Government Revenue 2G:-Rs.10,772 crore 3G:-Rs.1Lakh crore

REPORT IN DETAIL: The Supreme Court of India has rapped the premier investigating agency, Central Bureau of Investigation (CBI), for conducting a slipshod investigation into the 2G Spectrum Scam. The Apex court took the CBI to task by stating that the agency was dragging its feet in the investigation. The SC is hearing two petitions in the matter. The first was filed by an NGO, Centre for Public Interest Litigation (CPIL), and the second filed by Janata Party chief Subramanian Swamy. Swamy had challenged the Delhi High Court order that rejected his plea to direct the PM to grant
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sanction to prosecute Telecom Minister A Raja. CPIL has placed before the Supreme Court two draft reports of the Comptroller and Auditor General (CAG), which pointed out that the 2G scam has caused a loss of over 1 lakh crore to the exchequer. Canary Trap brings you some important extracts of the CAG draft reports, which directly points a finger of suspicion towards Raja for alleged irregularities and favoritism in the allotment of spectrum. Despite all agencies having full knowledge of scarcity and under pricing of spectrum, the entry fee for issue of licenses continued to be pegged at 2001 rates even in 2007 without delinking and independently pricing spectrum through a market mechanism, when the entire scenario in the telecom sector had transformed in the meanwhile. Ignoring the advice of the Prime Minister, and the Law Ministry, Raja went ahead with arbitrarily deciding that the cut-off date for issue of LoI would be advanced to September 25, 2007 and the applications received would be decided on first-come-first-serve (FCFS) basis. The CAG report states that it was amply demonstrated between September 2007 and December 2008 that its (spectrum) demand in view of its scarcity was at its peak and thus would have fetched the market determined price at a much higher level than that of 2001 entry fee. If price is calculated at 3G rates, which also be taken as one of the indicators for assessing the value of 2G spectrum allocated to UAS licensees in 2008, the value works out to Rs 111,511 crore against Rs 9,012 crore realised by DoT. Similarly, for spectrum allocated under the
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dual technology as referred in earlier para the value would have been

Rs 40,526 crore,as against Rs 3,372 crore collected. The total difference in value worked out to Rs.139,692 crore. It was evident that at the time of applying for UAS licence the substantial equity of M/s Reliance Telecom Ltd in M/s Swan was 10.7%. Since M/s Reliance Telecom Ltd. were operating in all the service area for which M/s. Swan Telecom Ltd. has applied for USAL, their application was not in conformity with clause 8 of UASL Guidelines, and hence was not eligible to be considered. DoT did not have any mechanism to verify the correctness of the shareholders pattern of the applicant and hence the matter should have been referred to the Department of Company Affairs as was advised by the Finance Wing of the Department. No Reference, however, was made to the Department of Company Affairs and instead M/s Swan Telecom was given an opportunity to resubmit a revised stake holding pattern in December 2007 i.e. 9 months from their date of application which declared that M/s Reliance Telecom had divested their entire stakes. This was accepted by DoT and M/s Swan Telecom was given the benefit of seniority form the date of their initial application i.e. March 2007. As M/s Swan did not meet the eligibility criteria on the date of application, its application, its application should have been rejected by the department and the company should have been asked to apply afresh. Even if it is was to be considered eligible on the basis of its old application, the date of priority based on FCFS basis should have been
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revised from March 2007 to December 2007 in order to ensure

fairness. Had it been so, the company would have been out of the race as the department processed only those applications which were received up to 25.09.2007. It was noted that the priority list was adjusted in Punjab and Maharasthra service areas to give under advantage to M/s Swan Telecom Pvt. Ltd. in allocation of spectrum. In Punjab service area, 15 MHz GSM spectrum was available in September 2008 which was sufficient to meet the demand of only first three applicants in the priority list i.e. M/s HFCL, Idea Cellular Ltd. and Unitech Wireless Pvt. Ltd. The request of M/s Idea Cellular Ltd. who was at the second place in the priority list was, however, not considered on the grounds of its merger with M/s Spice who were offering service in Punjab service area. By keeping out M/s Idea from the priority list, spectrum was allocated to M/s Swan Telecom who was at the 4th position on the priority list. In identical situation in Maharashtra service area, M/s Spice Communications was not allocated start-up spectrum citing its merger with M/s Idea Cellular Ltd. Here too, the resulting beneficiary was M/s Swan Telecom Pvt. Ltd. Deviation from a Cabinet decision should normally be with the approval of Cabinet. However, in the present case, such a crucial decision to permit service providers to offer access services using combination of technologies (CDMA, GSM and/or any other) under the same license with the dual spectrum allocation was taken without the matter being referred to Cabinet.
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DoT has given a list of operators who could attract foreign investments,

consequent to the grant of UAS licenses in January 2008 as in the Table below (Table not included in the post). Out of the above six, three companies viz M/s Swan Telecom, M/s S Tel and M/s Unitech were new entrants in the telecom sector. The fact that these operators could draw huge foreign investment, even before establishing a foothold in the Indian Telecom market would suggest that acquiring UASL and with it, allotment of 4.4 of GSM spectrum for rollout, was the main factor which attracted the foreign investment. The Unitech Wireless Services, claimed in their letter to DoT on November 4, 2008 that M/s Telenor was partnering with them at a stage when about 6 months of effort and Rs 2,100 crore expenses had already been put in and the entitys value was not only that of spectrum. However, considering that Telenor is an established international provider of a high quality telecommunications, data and media communication services and one of the Norways largest companies owned 54% by the Norway Government what they would have required to run their business in this country was, primarily access to the spectrum. Considering its trained manpower strength in 12 countries, its long standing technical expertise and international experience of dealing in telecom business, it can be convincingly concluded that, the high value paid by them was primarily for the spectrum and not for other inputs claimed to have been infused by Unitech. Such huge equity infusion by the investor company was a price that they paid for 2G spectrum which was allocated to Unitech, a company with no experience in telecommunication sector, at a throw
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away price DoT. The value which should have accrued to the new licensees in the form of huge capital infusion for enriching their business. The entire process of spectrum allocation was undertaken in an arbitrary manner. The Honble prime Minister had stressed on the need for a fair and transparent allocation of spectrum, and the Ministry of Finance, and the Ministry of Law and Justice had sought for the decision regarding spectrum pricing to be considered by an EGoM. Brushing aside these concerns and advices, the Development of Telecommunications, in 2008, proceeded to issue 122 new licenses for 2G spectrum at 2001 prices, thus flouting all rules and procedures to be followed for spectrum allocation was also unfair, considering the fact that DoT introduced in artificial cap, arbitrarily changed the cut-off-date for receipt of applications post facto and altered the conditions of the FCFS procedure it had been following, thus creating an environment which cannot be perceived as transparent and fair. Dual Technology was introduced by DoT in a manner, which was in contravention of the Cabinet decision of 2003, resulting in additional spectrum being allotted to certain operators at 2001 price. Also by introducing unfair adjustments in the priority list, DoT favoured certain operators. Given its scarcity value and increasing demand, a comprehensive evaluation of available spectrum was required which was not done. With the UAS policy and its subsequent amendments being implemented in a weak and indeterminate manner and with the
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reluctance on the part of DoT to address the issue of pricing of 2G

spectrum, it was only natural that 2G spectrum was allocated at much below its value. The Honble MoC & IT for no apparent logical or valid reasons ignored the advice of Ministry of Law, and Ministry of Finance, avoided the deliberations of the telecom Commission to allocate 2G spectrum, a scarce finite national asset at less than its true values on flexible criteria and procedures adopted to benefit a new operators. TRAI, the regulator also stood by as a helpless spectator when its recommendations were being either ignored or misused. The CAG draft report also mentions a note (Dated: January 15, 2008) sent to the PM by the Finance Ministry, which says that the previous issues of licences be treated as a closed chapter and henceforth price of spectrum be discovered through an auction process. This reveals the casual approach within the UPA Government towards this megascam, which resulted in a loss of Rs 139,652 crore to the exchequer. Despite mounting evidence (from CVC, CAG, CBI) of blatant corruption A Raja still presides over the Telecom Ministry. While Prime Minister Manmohan Singh heading one of the most corrupt governments in our country post-Independence seem helpless in taking action against Raja because of the electoral considerations for the assembly polls in Tamil Nadu due to take place in 2011.

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Category

Loss as per CAG based on 3G Auction (in crore)

Loss based on TRAIs news 2G/3G value (in crore) 54,323.9 19,691.6 50,310.5 1,24,326.0

122 new licenses 35 Dual tech licenses

1,02,498 37,154

Spectrum held in 36,993 excess of 6.2Mhz

TOTAL LOSS

1,76,645

SPECTRUM ONOMICS

Source:-CAG report NOV 2010 and TRAIs report on

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2g spectrum on Feb 2011.

Actions taken after the alligations:

In early November 2010 Jayalalita accused the Tamil Nadu state chief minister M Karunanidhi of protecting A. Raja from corruption charges and called for A. Rajas resignation.By mid November A. Raja resigned.

In mid November the comptroller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required at the time of the application and were in other ways illegal. Some media sources have speculated that these companies will receive large fines but not have their licenses revoked, as they are currently providing some consumer service.
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 In response to the various allegations , the Govt of India has replaced the then incumbent Telecom minister ,A Raja with Kapil Sibal who has taken up this charge in addition to being the Union minister for Human Resources Development.Mr Sibal contends that the notional losses quoted are a result of erroneous calculations and insists that the actual losses are nil. The CBI conducted raids on Raja and four other telecom officials former telecom secretary Siddharth Behura, Rajas personal secretary R K Chandolia, member telecom K Sridhar and DoT deputy director general A K Srivastava on 8th December 2010.

Raja, Behura and Chandolia were arrested on Feb 2nd 2011.

View of present Telecom Minister

Kapil Sibal replaces A.Raja as the Telecom Minister in addition to being the HRD minister Mr.Sibal contends notional losses quoted are a result of erroneous calculations and insists that actual losses are nil

WHAT does Rs. 1.76 lakh crore mean to our nation?

Golden quadrilateral Highway project RTC buses Could be a big boost for our defunct public transport.
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Buffaloes could improve our dairy sector.

 Nagarjunsagar dams-Could vastly improve irrigation sector(No more need for loan waivers) Shamsabad airports Could improve the aviation sector big time.

Lakh Nurshing homes-Could be a big boost of our disastrous health sector. Schools- Can go a long way in improving our literacy rate-65%.

Crore Computers- Could established India as the IT capital of the world. Fighter Jets- Could strengthen our defence system in a big way.

WHAT should the Government do?

Recover the scam money by canceling the licenses and issue new licenses. Enact a comprehensive anti-corruption law and create an Independent Anit-Corruption Commission (IACC). Enact a Windfall Profits Tax law( on the lines of the UK law 1997).

Enact a False Claims Act (on the lines of U.S.law)

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CONCLUSION
The 2G Spectrum Scam is one of the biggest scandals that came into limelight. The number of cell phone users climbed up to 350 million from 4 million users in the period 2001 t0 2008. This un-imaginative growth in the number of users became very difficult for the government to digest. companies The The licenses were distributed to the private telecom without fulfilling the requirements, license fees etc. Indian Government lost around Rs. 1.76 Lakh

crore because of this scam. The persons involved in the scam are very
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high profiled and powerful. It would be a great achievement of Indian

Judiciary,

if the guilty persons are penalized in the court.

From the time allegations of misappropriation during the building for allocation of 2G spectrum surfaced, till Telecom Minister A Rajas ouster, high drama charged both politics in Delhi and Tamil Nadu. So what exactly is the Spectrum scam that led to all this? WHAT IS SPECTRUM SCAM? 2G licenses issued to private telecom players at throwaway prices in 2008 CAG: Spectrum scam has cost the government Rs. 1.76 lakh crore CAG: Rules and procedures flouted while issuing licenses WHAT ARE THE CHARGES ON FORMER TELECOM MINISTER A RAJA? CHEAP TELECOM LICENSES Entry fee for spectrum licenses in 2008 pegged at 2001 prices

Mobile subscriber base had shot up to 350 million in 2008 from 4 million in 2001.

NO PROCEDURES FOLLOWED Rules changed after the game had begun Cut-off date for applications advanced by a week Licenses issued on a first-come-first-served basis No proper auction process followed, no bids invited Raja ignored advice of TRAI, Law Ministry, Finance Ministry TRAI had recommended auctioning of spectrum at market rates FAVOURITISM, CORPORATES ENCASH PREMIUM
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 Unitech, Swan Telecom got licenses without any prior telecom experience Swan Telecom given license even though it did not meet eligibility criteria Swan got license for Rs. 1537 crore, sold 45% stake to Etisalat for Rs. 4200 crore Unitech Wireless got license for Rs. 1661 crore, sold 60% stake for Rs. 6200 crore All nine companies paid DoT only Rs. 10,772 crore for 2G licences

BIBLIOGRAPHY
Magzine Refers: Out Look Express India Today
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News Paper Refers:

 Times Of India The Hindu Website Refers:

http://timesofindia.indiatimes.com/ http://en.wikipedia.org/wiki/2G-Scam/ http://NDTV.ndtv.com/ http://business-standard.com/

Search Engines:

www.Google.com www.bing.com www.yahoo.com

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