Overview of the Indian 2G Scam


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Overview of the Indian 2G Scam

  1. 1. 2G Scam - Overview
  2. 2. What is 2G spectrum ?• It is a term used in telecommunication sector• It is a spectrum which support 2G technology• High bandwidth is required for this purpose• 2G means second-generation wireless telephone technology• Second generation 2G cellular telecom networks were commercially launched on the GSM standard in Finland in 1991• 2G introduced data services for mobile, starting with SMS text messages
  3. 3. What is 2G scam ?• Acc. To comptroller and auditor general(CAG) – 2G licenses issued to private telecom players at throwaway prices in 2008 2G spectrum allocation had caused revenue loss of Rs 1.76 lakh crore Rules and procedures flouted while issuing licenses• What is CAG?• CAG is a typical file-based government auditing agency• It stresses on reporting deviations from set procedures and policies and fails to recognize that the deviations have resulted in speeding up economic growth
  4. 4. 2G spectrum Scam – Background (1/2)• India is divided into 22 telecoms zones and there are a total 281 zonal licences in the market• According to the telecom policy of India, when a licence is allotted to an operator some start-up spectrum is bundled along with it• In year 2008, 122 new second generation (2G) Universal Access Service (UAS) licenses were given to telecom companies at the price of 2001 and on first come first serve basis• As per the charge sheet filled by CBI several rules were violated and bribes were paid to favour certain firms while awarding 2G spectrum licenses• 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• In November 2007, PM 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
  5. 5. 2G spectrum Scam – Background (2/2)• Raja wrote back to the Prime Minister rejecting many of his recommendations• In the same month Ministry of Finance wrote a letter to Department of Telecommunications (DOT) raising concerns over the procedure adopted by it but DOT went ahead with its plan of giving 2G licenses & It preponed the cut- off date to 25 September, from 1 October 2007• 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• Companies like Unitech & Swan Telecom got licenses without any prior telecom experience• Swan Telecom got the license even though it did not meet eligibility criteria• Swan got license for 1,537 crore (US$338.14 million) and then it sold 45% stake to UAE based company Etisalat for 4,200 crore• Unitech Wireless, got license for 1,661 crore and later sold 60% stake for 6,200 crore to Norway based company Telenor
  6. 6. How Irregularities Happened in 2G scam? (1/2)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
  7. 7. How Irregularities Happened in 2Gscam? (2/2)FAVOURITISM, CORPORATES ENCASH PREMIUM• 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
  8. 8. Chronology of 2G spectrum scam Barring Raja and Behura, 12 others get bail Feb 2012 Raja & many other key people Arrested VISION 1. CAG report says the scam caused a loss of Rs 1.76 lakh crore to exchequer 2. Raja Resigns as Telecom Minister SC cancels 122 licences Nov 2011 granted during Rajas Nov 2010 tenure. Directs auctioning DoT decides to issue licenses on first-come-first Feb 2011 of licences in 4 months served basis, preponing the cut-off date to September 25, from October 1, 2007 Jan 2008 2009 CVC directs CBI to probe allocation of Nov 2007 2G spectrum DoT receives 575 applications for UAS licenses of 46 companies PM writes to Raja directing him to ensure allotment of 2G spectrum in a fair and transparent manner and to ensure licence fee was properly revised & Oct 2007Process of allotment of 2G Spectrum for telecom along Raja writes back to PM rejecting many of hiswith Universal Access Service Licences initiated by the recommendations Department of Telecommunications Telecom Ministry issues press note fixing deadline for Sept 2007 application as October 1, 2007 Aug 2007 May 2007 Raja takes over as Telecom Minister
  9. 9. Who all are Involved? (1/2)• DMK chief M Karunanidhis daughter and MP Kanimozhi who has been named by the CBI as a co- conspirator with A Raja• Shahid Balwa, the promoter of Swan Telecom, who the CBI believes had a central role in the 2G spectrum scam. He has been accused of colluding with former Telecom Minister A Raja by allegedly channelising kickbacks Raja got from the spectrum sale into the real estate• Unitech chief Sanjay Chandra and DB Realty founder Vinod Goenka who have been chargesheeted for cheating and conspiracy• Three senior executives of Anil Ambani controlled ADAG, Gautam Doshi, Hari Nair and Surendra Pipara. All these are currently lodged in Tihar Jail• Former telecom secretary Sidharth Behura, who allegedly shut counters to physically block other telecom companies, faces the same charges as Raja. And so does Rajas Personal Secretary RK Chandolia
  10. 10. Who all are Involved? (2/2)• One of the companies named by the CBI in the 2G scam - Swan Telecom - allegedly sent Mr Raja a Rs. 214-crore kickback that was routed through a maze of companies but rested finally with Kalaignar TV channel in Chennai that is owned mainly by Kanimozhi and Dayalu Ammal. Together, they have 80% stake in the company. Sharad Kumar, the Managing Director of Kalaignar TV, owns the balance and has also been accused of conspiring with Mr RajaCorporates Involved:• Unitech Wireless• Reliance Telecom• Swan Telecom• Loop Telecom Pvt Ltd• Loop Mobile India Ltd• Essar Tele Holding• Essar (Parent group of Essar Tele Holding
  11. 11. Zero Loss Theory (1/2)• Since it was based on 6.2 MHz allocation while actual allocation was 4.4 MHz • Sale of 122 licenses plus 35 dual technology licenses, in 2008 at 2001 prices from Rs 1,69,652 crore down to Rs 99,000 crore• Valuation of 2G spectrum vis-à-vis 3G • Sibal had contended as a part of his zero loss theory that the residual Rs 56,000 crore loss was in reality only Rs 17,775 crore since according to him "2G is one- 0 – 30K – 1.76 L third the value of 3G spectrum“• UPA only followed NDA policies in awarding 2G licences in 2008
  12. 12. Zero Loss Theory (2/2)• Rejection of Theory• TRAIs analysis is based on spectrum upto 6.2 MHz and beyond, taking no cognizance of Sibals zero loss theory• Financial implication of this difference of opinion between Sibal and TRAI will be roughly Rs 12,500 crore (roughly 7 pan-India licenses x 1.8 MHz spectrum x Rs 1,769 crore per MHz)• Claims of vendors/service providers that 3G is three times more efficient than 2G can only be right if technological innovations that are available for 2G networks are not adopted• These innovations have resulted into delivery of not only similar capacity of 2G networks as of 3G but even higher“• Additionally, in a circle-wise analysis, the report concludes that, "2G value at aggregate levels is about one-and-a-half times the 3G bid, although there are inter-circle variations• 2G spectrum is slightly more valuable in case of most A category service areas"
  13. 13. 2G Licenses Number Number Telecom regions for which license Telecom regions for which licenseName of Company of license was granted Name of Company of license granted was granted Adonis Projects Pvt. Ltd. Haryana, Himachal Pradesh, Jammu & Kashmir, 6 granted Punjab, Rajasthan, Uttar Pradesh (East) Madhya Pradesh, Kerala, Kolkata, Punjab, Uttar Assam, Bihar, North East, Orissa, Uttar Pradesh (East),Nahan Properties Pvt. Ltd. 6 Pradesh (East), Uttar Pradesh (West), West Bengal, West Bengal Aska Projects Ltd. Andhra Pradesh, Kerala, Karnataka 3 Shyam Telelink Limited Andhra Pradesh, Delhi, Haryana, Karnataka, 17 Volga Properties Pvt. Ltd. Gujarat, Madhya Pradesh, Maharashtra 3 Maharashtra, Orissa, Tamil Nadu (including Chennai), Azure Properties Ltd. Kolkata 1 Assam, Jammu & Kashmir, North East Hudson Properties Delhi 1Unitech Builders & Estates Shyani Telelink Limited Mumbai, Bihar, Gujarat, Himachal Pradesh 4 Tamil Nadu (including Chennai) 1 Pvt. Ltd. Andhra Pradesh, Gujarat, Haryana, Karnataka, Kerala,Unitech Infrastructures Pvt. Maharashtra, Punjab, Rajasthan, Tamil Nadu Mumbai 1 Swan Telecom Pvt. Ltd. 13 Ltd. (including Chennai), Uttar Pradesh (East), Uttar Bihar, Gujarat, Himachal, Pradesh, Kerala, Kolkata, Punjab, Rajasthan, Uttar Pradesh (East), Uttar Pradesh (West), Delhi, Mumbai Pradesh (West), West Bengal, Andhra Pradesh, Delhi, Allianz Infratech (P) Ltd. Bihar, Madhya Pradesh 2 Loop Telecom Pvt. Ltd. 21 Haryana, Karnataka, Maharashtra, Orissa, Tamil Nadu Assam, Punjab, Karnataka, Jammu and Kashmir, (including Chennai), Assam, Jammu & Kashmir, Madhya Pradesh, North East Idea Cellular North East, Kolkata, West Bengal, Orissa, Tamil Nadu 9 Andhra Pradesh, Assam, Bihar, Gujarat, Haryana, (including Chennai) Himachal Pradesh, Jammu & Kashmir, Karnataka, Spice Communications Ltd. Delhi, Andhra Pradesh, Haryana, Maharashtra 4 Kerala, Kolkata, Madhya Pradesh, Maharashtra, NorthDatacom Solutions Pvt. Ltd. 21 Assam, Jammu and Kashmir, Orissa, North East, East, Orissa, Rajasthan, Tamil Nadu (including S Tel 6 Chennai), Uttar Pradesh (East), Uttar Pradesh (West), Bihar, Himachal Pradesh West Bengal, Delhi, Mumbai Tata Teleservices Jammu and Kashmir, Assam, North East 3
  14. 14. 2G Scam
  15. 15. Thank you