2G spectrum scam took place in India in late 2000’s which involved politicians and government officials who tried illegal undercharging mobile telephone companies for frequency allocation licenses, which they would then use to create 2G spectrum subscriptions for mobiles. The entire process of allocation of UAS licences lacked transparency and was undertaken in an arbitrary, unfair and inequitable manner.

1. Financial Frauds in India

2. About 2G scam
What is spectrum?
Need for allocation of spectrum
Methods of allocation
Corporations involved
Corporates involved
Bureaucrats and politicians involved
Others
Role of Media
CAG report
Zero loss theory
CONTENT

3. About 2G SCAM
• 2G spectrum scam involved politicians, government officials and
business tycoons.
• It is all about illegal undercharging mobile telephone companies
for frequency allocation licenses creating 2G spectrum subscriptions
for mobiles
.
• The total loss was estimated around 1.76 lakh crores Rupees based on
auction.
• UAS licences lacked transparency

4. What is Spectrum?
• It is the electromagnetic radiation, used as carrier of wireless
transmission.
• Basic requirement for providing wireless services.
• Non-consumable global natural resource
• Commands high economic value in the telecommunication
sector.
Cable TV 145-860 MHz
2G 800-1900 MHz
3G 2100 MHz
4G, broadband internet 2300 MHz

5. Need for allocation of spectrum
• Private player (businessman) cannot afford satellite because of its
high price .
• Government launched the satellite using ISRO. Thus there is a need
for spectrum.
• Government charges money to whosoever (cell phone company)
would use this spectrum.
• Due to this, launching own mobile service using this 2g highway and
transportation of data packets is possible.
• 3G or 4G can be used, which provide faster data transfer, but are
more expensive.
• It is accessible by applying to dept of telecom.
• The govt decides whom to allocate according to his/her past
experience.

6. Methods of allocation
First come First Serve (FCFS) :
• In January 2008 Department of Telecommunications (DoT) issued
120 new licences for Unified Access Services (UAS).
• Allocation done based on first come first serve basis and a cut off
date and time were given.
• Questions were raised regarding transparency of this procedure.
• Loss of national asset as no revenue was generated by allocation
of spectrum

7. Methods of allocation
Auction :
• Government uses an auction system to sell the rights (licences)
to transmit signals over specific bands of the electromagnetic
spectrum
• Method to assign scarce spectrum resources which can
contribute to overall well being of the state by generating
revenue in the process.
• Auctioning is a step toward market-based spectrum
management and privatization of public airwaves.
• Resources are allocated efficiently to private players who
value them the most.

8. Corporations Involved
• Unitech Group
• Swan telecom
• Videocon communication system
• Reliance communication
• Tata communication
• Loop telecom
• Essar teleholding
• S tel
• Dishnet wireless
• Alianz infra

9. Swan Telecom
• Swan Telecom was a subsidiary of Reliance Communications
and Dynamix Balwas (DB) Realty , set up to bypass the single-
company single-license rule that was in place.
• October 2007- License was allocated based on first cum first
serve basis even when the eligibility criteria was not met.
• The business unit was awarded Unified Access Services License
in 15 circles
• Swan got a license for 15.37 billion (US$260 million) and then it
sold 45% stake to UAE-based company Etisalat for 42
billion (US$700 million).
• In 2012, Etisalat announced that it will cease operations in India
post cancellation of its licenses by Supreme Court of India

10. Corporates involved
• Sanjay Chandra- Unitech Wireless.
• Gautam Doshi, Hari Nair and Surendra Pipara-
RelianceAnilDhirubhai Ambani Group.
• Vinod Goenka and Shahid Balwa-DB Realty & Swan
Telecom
• Asif Balwa and Rajiv Agarwal- Kusegaon Fruits and
Vegetables.

11. Unitech
• Unitech wireless had allegation that cut off date of
application was changed so that no other
company can apply after Unitech.
• Unitech got into a joint venture with Norway’s
telecom to brings in funds for setting up the
infrastructure.
• All investment of Telenor get approval from the
foreign investment promotion board and cabinet
committee on economic affairs.

12. Role of Media
• Corporate lobbyist Nira Radia’s conversation with politicians
and corporates were recorded by Indian Income tax
department
• Tape was leaked which gave rise to Nira radiya tape
controversy.
• CBI has about 5851 recordings of conversation
• Radia used some media person to influences the decision of
forming A raja as telecom minister.
• Media hyped this issue but hide the involvement of big
corporates

13. Politicians and bureaucrats involved
• A. Raja- Minister of communication and information technology
• M. K. Kanimozhi- Rajyasabha MP
• P Chidambaram- Minister of home Affairs
• Siddharth Behura- Telecom Secretary
• RK Chandolia-Raja's private secretary

14. A. RAJA
• The 2G Spectrum scam, one of the largest financial frauds to
have hit the Indian Telecommunications and IT Industry.
• The then Telecom minister , A.Raja ,allegedly under valued the
telecom bandwidth and offered it to a chosen few with vested
interests on a dubious first-cum-first serve basis instead of
opting for a transparent auction process.
• He eventually resigned and a criminal case was filed against
him on the basis of reports of CAG and CBI.
• On February 2, 2011 , CBI arrested Raja and his personal aide,
Siddharth Behura, former telecom secretary.
• He got a bail in 2012.

15. CAG Report

16. ZERO LOSS THEORY
• As per the government the licenses were distributed on First-
cum-First Serve basis which means frequencies were not sold for
less than cost.
• Thus, suggesting that no loss was incurred in the sale, i.e. ZERO
LOSS and indicating the legitimacy of the sale.
• Mr. Kapil Sibal campaigned against the CAG report and
rendered its loss estimate as erroneous.
• He further said that government policy is formulated to maximize
public welfare and not merely to maximize government
revenues.

17. Milestones of Scam
• Unitech, Swan Telecom got licence without any prior
telecom experience.
• Swan telecom got license without fulfilling eligibility
criteria.
• All nine companies paid DoT only rs 10772 crores for 2G
license.
• Unitech wireless got got silence for 1661 crores, sold
60% stake for 6200 crores.
• Swan got license for Rs 1537 crores, sold 45% stake to
estimate for Rs 4200 crores.

18. Chronology

19. The Supreme Court verdict
• Supreme Court cancelled all
122 licences
• Government auctions
cancelled licences in
consultation with TRAI
• Supreme Court said “Auction is
not the only method unless the
resource gives huge profit to a
company”

20. Reframing of licences
• Starting from 2012, licence
allocation only through
auction
• Apply for licence
separately and purchase
spectrum separately
• Existing mobile operators
has to surrender their
licences and should apply
for fresh licence and
spectrum

21. 2G Spectrum Auctions in ’12 & 13
• Due to high auction reserve price, in 2012 and
2013 the auction got lukewarm response.
• In 2013, no bidders for 1200 MHZ and 900 MHZ
spectrum. MTS was the only bidder for 800 MHZ.
• The eight bidders applied to participate in the
2014 auction after the government sharply cut
auction reserve prices.

22. After effects of Supreme Court's verdict
• Batelco The Bahrain telecommunications company quits India
• Telenor terminates agreement and sues Unitech
• Etisalat sues Shahid Balwa and Vinod Goenka
• Loan money of Banks is stuck.

23. Can we prevent licensing scam?
• Full details and documentation regarding
the license sanctioning should be available
to all the stake holders at least 3 weeks in
advance.
• Government can sanction licenses to pre
qualified candidates on lottery basis
• Reforms will yield a public dividend several
times the size of the scam itself.