Areporton2gspectrumscam 2 140513104233 Phpapp02(1)

8/10/2019 Areporton2gspectrumscam 2 140513104233 Phpapp02(1)

1/24

Introduction

Definition:

2G (Second Generation Telecommunication Standard) is means the wireless mobileswhich was introduced in second generation. Spectrum means bandwidth which was

sgiven by government of India. Now 2G is in operation and G is e!pected.

WHAT IS 2G

2G means second"generation wireless telephone technology.

Second generation 2G cellular telecom networ#s were commercially launched on the

GS$ standard in %inland in &''&.

2G introduced data services for mobile starting with S$S te!t messages

WHAT IS 2G SCAM

2G licenses issued to private telecom players at throwaway prices in 2*

Spectrum scam has cost loss to the government +s. &.,- a#h crore

+ules and procedures flouted while issuing licenses

WHO CAUSED IT?The then telecom minister /ndimuthu +a0a caused the 2G scam

/ +a0a caused the loss of 1 billion to the Government by selling the icenses of

networ# to the private players without following any rules and regulations.

1| S A T N A M S I N G H


2/24

2G Scam: It means issuing of 2G licenses to private telecom companies at low prices. The

companies paid fewer amounts to the government which hits the profit and revenue of the

government. It was done by bribing the epartment of Telecom (oT).

2g is a networ# service which was supposed to be launched in india for which the networ#

providers such as vodafoneloop3bplrelianceairteldocomo etc. had to be approved by the

govt. of india to hold the licence for the bandwidth which is used for the 2g service and for this

license the politicians of india have said to be ta#en some bribe 0ust to give the licence for

eg4the 5g facility allows us to stream videos from the internet from the cellphone for live

streaming the internet usage amount is high hence they re6uire a particular licence from the

government to allow them to use similarly the 2g re6uired a licence for which a bribe had been

demanded by the politicians which has now7 been e!posed hope this helps you

2G"second generation/.+a0a minister of communication and IT cheated ind gov..2g

spectrum scam involved officials nd minister nindia illegally under charging mob

telephons companies for fre6uency allocation licenceswich they would use 2 create 2G

subscriptions for cell phons .according 2 a report submitted by the comptroller and

auditor based on money collected from 5G8 licences.this made loss of rs.&,-.5,'

crores(1 billion)...and more info came out when tapping the phone calls of lobbyist

niiraradia.

2G (or 2"G) is short for second"generation wireless telephone technology. Second

generation 2G cellular telecom networ#s were commercially launched on the GS$

standard in %inland by +adiolin0a9&: (now part of ;lisa hile radio signals on &G networ#s are analog radio signals on 2G



3/24

networ#s are digital. ?oth systems use digital signaling to connect the radio towers

(which listen to the handsets) to the rest of the telephone system. 2G has been

superseded by newer technologies such as 2.@G 2.,@G 5G and G= however 2G

networ#s are still used in many parts of the world.

Some of the many conversations recorded over 5 days were lea#ed to the media.

The intense controversy around the lea#ed tapes became #nown in the media as the

+adia tapes controversy. The tapes featured some e!plosive conversations between

Aoliticians Bournalists and Corporate Douses. Aoliticians from Earunanidhi to

/runBaitley 0ournalists li#e ?ar#hautt and FirSanghvi and Industrial groups li#e the

Tatas were either participants or mentioned in these e!plosive tapes. In 2* the

Income Ta! department after orders from the ministry of Dome and the A$


4/24

not acting on removing +a0a the main accused in the scam in spite of %inance minister

Chidambarams warning to him .In a note to the A$ on Banuary &@ 2* Chidambaram

had reiterated the finance ministrys suggestion to auction spectrum as the price would

be based on scarcity value. De then went on to suggest this could be used as one"time

for additional spectrum. 5. Aoliticians involved L Cellular) Services icenseJ which

allowed fi!ed line operators who had paid much lower license fees to offer mobile phone

services at first in the limited > mode (>ireless local loop) and later following an out

of court settlement between mobile operators and the ?BA govt full mobility. This gave

an advantage to players li#e +eliance and Tata Teleservices who managed to get

mobile spectrum without paying the hefty fees that earlier operators li#e ?A $obile had

paid.

+ E Chandolia " private secretary of +a0a during HA/"I when the licences were

awarded. De was an Indian ;conomic Service officer of the &'* batch cadre. >hen

+a0a became the Telecom $inister once again in HA/"II Chandolia had been promoted

to the Boint Secretary ran#. +a0a re"designated him ;conomic /dviser that gave him the

charge of all important policy"related wor#. Chandolia interacted with all the licensees. It

is said that it was Chandolia who from G" access services / E Srivastavas room

had handed out letters of intent to representatives of various companiesAradip?ai0al "

a bureaucrat who is alleged to have implemented policies that favored certain Telecom

companies when he was heading the T+/I. Aost retirement ?ai0al 0oined Noesis a

consulting firm. +a0a has made references to ?ai0als decisions in 25 as the basis for

his decisions in 2*. The houses and offices of the bureaucrat were recently when

raided by the Central ?ureau of Investigation as part of their investigations.

Siddhartha ?ehura " former telecom secretary who served in the


5/24

Communications S Tel Fideocon Telecommunications oop $obile Swan

Hnitech@. Corporations Corporative involved personalities involved

+a0a ?ehura and Chandolia were arrested on %eb 2nd 2&&.The C?I conducted

raids on +a0a and four other telecom officials " former telecom secretary

Siddharth?ehura +a0as personal secretary + E Chandolia member telecom E Sridhar

and oT deputy director general / E Srivastava on * ecember 2&. In response to

the various allegations the Govt of India has replaced the then incumbent Telecom

minister / +a0a with EapilSibal who has ta#en up this charge in addition to being the

Hnion minister for Duman +esources evelopment. $rSibal contends that the JnotionalJ

losses 6uoted are a result of erroneous calculations and insists that the actual losses

are nil. In mid November the comptroller Finod+ai issued show"cause notices to

Hnitech S Tel oop $obile atacom (Fideocon) and ;tisalat to respond to his

assertion that all of the *@ licenses granted to these companies did not have the up"

front capital re6uired 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 revo#ed as they are currently providing some consumer service.

In early November 2& Bayalalithaa accused the Tamil Nadu state chief minister $

Earunanidhi of protecting /. +a0a from corruption charges and called for /. +a0as

resignation. ?y mid November /. +a0a resigned. -. +esponse to Scam

The first casualty in Stoc# $ar#ets once +a0a was arrested was ? +ealty. ? +ealty

had given 2M crores to EalaignarTF( owned by Earunanidhis >ife) . The news led to

2 fall in the stoc# prices of ? +ealty. Sun TF had its shares fall by & on the ne!t

day following rumours of Ealanidhi$aran having sta#e in Ealaignar TF. Sun TF C


6/24

prosecute /. +a0a in regards to 2G telecom spectrum political corruption scam.>hen

the Arime $inister $anmohan Singh didnt ta#e any decision Swamy went to Supreme

Court. hat DappenedO2G licenses issued to private telecom players at throwaway prices

in 2*C/G4 Spectrum scam has cost the government +s. &.,- la#h croreC/G4 +ules

and procedures flouted while issuing licenses.Aerson accused is the Telecom

minister 4 /.+a0a

. The Comptroller and /uditor General of India (C/G) said it has submitted to the

government the report on the 2G spectrum allotment that is presumed to have caused a

revenue loss of up to +s. &.,- la#h crore.

@. C/G +eportC/G has accused the telecom ministry for undervaluing 2G spectrum

sold to new players in 2* and held that the allotment price was not realistic which

has caused a revenue loss of up to +s. &,-, crore to the government.The report is

also believed to have castigated telecom minister / +a0a for ignoring the advice of

finance and law ministries on allocation of 2G spectrum to benefit a few operators.It is

also believed to have criticised telecom regulator T+/I standing as a helpless spectator

when its recommendations were being ignored or misused.The C/G report said the

price at which the spectrum was alloted in 2* was based on 2& prices which was

6uite low and has resulted in a loss to the government e!che6uer./lso no proper

auction method was followed and no bids were ta#en to sell out the spectrum.

,. ielding to relentless opposition pressure Hnion telecom minister / +a0a resigned n

the wa#e of the 2G Spectrum allocation scam on &th november.De was arrested by the

C?I on 2nd %ebruary.

*. >ho /ll ?enefited from This Scam O2G spectrum was allocated beyond contracted

6uantity to ' firms including ?harti Fodafone Idea ?SN +eliance /ircelJ the report

said.Niira+adia is said to be involved.+ead her details.epartment of



7/24

Telecommunications (oT) circumvented the rules to help Swan Telecom which

effectively acted as a front for +eliance Telecommunications. The charges in the C/G

report are that Swan should not have been considered for a license because +eliance

Communications held &., sta#e in Swan " and according to the rules a telecom

operator cannot own more than & sta#e in another telecom company operating in the

same service area. J;mail I of Swan Telecom was shown as that of a +eliance //

group official

'. /nother big beneficiary of the 2G spectrum allocation was Hnitech >ireless which

had no e!perience in the telecommunication sector./fterHnitech got the license for a

throwaway price of +s. &--& crore it sold - per cent sta#e to Telenor /sia for a

whopping +s. -2 crore.

&. Aarties Involved with the 2G Case

&&. Aoliticians involved/. +a0a the ;!"$inister of Communications and Information

Technology who was the minister when the controversial second round of spectrum

allocations too# place. /runShourie the minister for Telecom during 25 in the

previous ?BA regime. Aramod$aha0an the minister for Telecom between &''' and

25.

&2. ?ureaucrats involvedSiddhartha?ehura former telecom secretary who served in the


8/24

&. $edia persons and lobbyists involvedNira+adia a former airline entrepreneur

turned corporate lobbyist whose conversations with politicians and corporate entities

were recorded by the government authorities and lea#ed creating the Nira+adia tapes

controversy.?ar#hautt an NTF 0ournalist alleged to have lobbied for /. +a0as

appointment as minister.FirSanghvi a Dindustan Times editor alleged to have edited

articles to reduce blame in the Nira+adia tapes.

&@. AetitionersSubramaniamSwamy activist lawyer and politician whose letters to the

Arime $inister demanding action and affidavits and cases in the Supreme Court

brought the issue into the public limelight.Aaran0oyGuhaTha#urta a 0ournalist who was

one among the very first to write on the irregularities in the awarding of 2G

2. Histor of 2G scam

+a0a arranged the sale of the 2G spectrum licenses below their mar#et value. In 2,

Telecom +egulatory /uthority of India(T+/I) had given its recommendations on pricing of 2Gspectrum to /.+a0a but he did not place the recommendations before the full Telecom

Commission which among others would have included the %inance Secretary.9&5:In November

2, Arime $inister of Indiar $anmohan Singhhad written a letter to telecom minister /.

+a0a directing him to ensure allotment of 2G spectrum in a fair and transparent manner and to

ensure license fee was properly revised. +a0a wrote bac# to the Arime $inister re0ecting many

of his recommendations.9&:In the same month J%inance $inistryJ wrote letter to Jepartment

of TelecomJ raising concerns over the procedure adopted by it 9&@:but Jepartment of TelecomJ

went ahead with its plan of giving 2G licenses. It proponed the cut"off date to September 2@

from


9/24

T!e 2G s"ectrum scam

This is the biggest scam till now in India. The Supreme Court said that this 2G Scam is the

mother of all the Scams.

The 2G spectrum scam involved officials in the government of India illegally undercharging

mobile telephony companies for fre6uency allocation licenses which they would 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 & ,-5,'crore rupees or HS 5' billion. The issuing

of licenses occurred in 2* but the scam came to public notice when the Indian Income Ta!

epartment was investigating political lobbyist Nira+adia.

The governments investigation and the governments reactions to the findings in the

investigation were the sub0ect of debate as were the nature of the Indian medias reactions.

The discussion around the reactions to the 2G spectrum scam became #nown in the media as

the Nira+adia tapes controversy.

/ +a0a the;!"$inister of Communications andInformation Technology is an Indian politicianfrom the $E who sold the licences and played a #ey role in 2G Scam and also who #nows

full details regarding 2G Scam.

Generally Tele Communication companies have to ta#e licence from Government by paying

large amounts for their operations and also Government have many rules to give permission

for new companies in Tele Communication.Sodue to +a0a many companies got the licences

very cheaply and also many new companies started their services with

outeligibilitycriteriawhich is illegal.

%ollowing is the information given by Comptroller and /uditor General(C/G)4


10/24

C/G indicts +a0a4

C/G says +a0a caused +s.&,,crore loss to India.

icences issued in 2*pegged at 2& prices.

+a0aQs ministry sold spectrum to ' companies in 2* using faulty Loutdatedpolicycausing

+s.& crore loss.

oled out additional airwaves to e!isting telecos beyond what they were entitled tocausing an

additional loss of nearly +s.5, crore to e!che6uer.

+a0a gave dual licence permits to +C


11/24

2G licences at throwaway prices

+ules bentno procedures followed.

Cut"off date advanced

No auctionno bids.

%irst"come"first"served.

Swan Telecom licence4+s.&@5, crore

Sold @ sta#e4+s.2crore

$obile subscriber base4 2*45@ million

&. Effect s On 2G Scam

&.' IM(ACT O# I#DIA# ECO#OM)

Indian economy at present is only ne!t to China as far as its growth rate is concerned.

Still the

worrying point is the fiscal deficit which inspite of all efforts is more than @ per cent of

IndiaQs

GA and is mounting year after year. /s per the audit report of Comptroller and /uditor

Generalof India (C/G) the Government of India was e!pected to earn somewhere

between +s. @,---



12/24

crore to +s. &.,- la#h crore had the fair dealings been done in the spectrum allocation.

The actual

realisation in turn was only +s. &25*- crore. Now since the e!ercise is to be repeated

once

again and that too in a fair manner the target envisaged by C/G is loo#ing realistic to

attain. Dence India is li#ely to earn huge revenue which in turn would help the country in

controlling

s#y high fiscal deficit persisting for some time now.

India is also hoping to get %oreign irect Investment (%I) on account of foreign players

see#ing

licence in the new 2G auctions. India definitely needs the same to push for attaining its

growth targets. The only worrying factor however is that prospective foreign entrants may

restrain from

investing in the country loo#ing at the plight of those who entered in 2*. The

Government

need to come out with a statement that whatever was done wrong in the past are a

history and that transparency would be ensured in the new bids.


13/24

&.2 IM(ACT O# GO*E+#ME#T ASSUMI#G O,,ICE

The verdict of Supreme Court is certainly an indictment on the Government. No

doubt the Government is putting blame on the individual who was the concerned minister at

that point of



14/24

time yet either of the two i.e ignorance of the Government or inability to control the

minister of

the coalition partner is a certainty. ?oth do not argue well for the Government. The

opposition

parties are demanding nothing less than the GovernmentQs head. ;ven the coalition

parties (other than $E) have started dictating terms to Congress on account of it. The image of

the

Government around the globe has also ta#en a beating. >riting on the wall is getting

clearer for it with every passing day.

Inspite of the political fallout the CourtQs order may still be counted as a blessing in

disguise for the Government. The auction of new licenses may put much needed money in its

poc#et. The

same will give it fiscal cushion. The %inance $inister himself had opined that on

account of

countryQs high demand and re6uirement improving revenue would be his topmost

priority. Now he has got a chance to fetch good money through 2G auction in the coming months.

The

Government may be ruing political fallout yet= the finance minister may be feeling

happy from

the core of his heart.

The courtQs verdict has ensured that Government will be having no say whatsoever

in deciding method to be followed for future 2G auctions. It will be the Supreme Court which will

be

dictating terms to the Government as to how to issue the licences. The Government

will thus be a&.- IM(ACT O# EISTI#G /ICE#SE HO/DE+S

There is no denying the fact that licence holders of the auction of 2* are going to be

the worst



15/24

Sufferers of Supreme CourtQs verdict. No doubt they were the partners in eye"opener

scam yet

the fact remains that they made investment only after getting necessary clearances

from the

Government. %ew of these are claiming that they are suffering even after being fully

compliant at ;ach stage of the licence allocation process.

/t the outset the business of these licence holders is to be wrapped up. $ost of these

have

already made huge investments in the country. Telenor for instance the co"partner in

Hninor has

so far invested +s. -& Crore in e6uity and over +s. * Crore in corporate

guarantees as foreign investor. Similarly Sistema of +ussia the partner of Shayam group of India has

so far

spent+s. &2@ Crore. The disgraced operators collectively would bear the loss of +s.

'

Crore for the amount paid as the licensing fees.

/dding insult to the in0ury would be a fine of +s. @ la#h to +s. @ Crore that each

operator would have to pay. No doubt the amount is meagre for any good business underta#ing yet

fine in itself is sufficient enough to dent its image. The image of the operators in global scenario is

also going

to get beating. /dding to all these would be the assets that these e!isting licence

holders would have to sell. They may even have to contend with throwaway prices they would get for

the same.

&.& IM(ACT O# O/D O(E+ATO+S

If the verdict has bro#en the heart of licence holders of 2* the old operators li#e

?SN ?harti



16/24

/irtel and Fodafone may find a big smile on their face on account of it. In a fiercely

competitive

mar#et if the old players could tap the customers of the outgoing players it would be a

huge

bonus for them. The same would give much needed boost to their earnings. There are

more than ,"Crore subscribers of the outgoing operators and through number portability= the old

operators

may get an easy access to these subscribers.

/nother benefit that would accrue to the old operators would be that these can tap the

assets of

the outgoing operators. The old operators if are deciding to leave the mar#et and not

indulge in new bids would not have too many options but to sell their assets at rather low prices.

The old

operators meanwhile can grab the opportunity with both hands by purchasing the

assets of the

old operators.

IM(ACT O# #EW O(E+ATO+S



17/24

Needless to say the farewell to e!isting licence holders would pave way for opening of

doors for

prospective operators. / good thing that is going to happen for them is that a fair

dealing would

be ensured as Court would #eep a direct vigil on the entire allotment. $oreover the

Government would never allow the history to repeat itself after the thrashing it has got from the court

and

everywell wisher of the country. Thus genuine operators would feel safe and secure at

least till the completion of the auction process. Still the image of the country is dented and the

operators especially the foreign ones would always remain perturbed with what is going to be in

store for

them in the country which is overpowered by the corruption.



18/24

&.0 IM(ACT O# CUSTOME+S

The e!isting customers of the outgoing operators may e!perience a temporary loss of

connection.

Dowever they still will have ample time to switch over to the old operators. The number

portability scheme would be ma#ing their life even easier. Thus the customers should

not be

bothered much by the happening. The new operators meanwhile would be having a

tas# cut out

for them as prospective customers would be tempted to give privilege to old and

established



19/24

&.1 IM(ACT O# I#*ESTO+S

The investors in the shares of outgoing operators would definitely be ruing their luc# as

the

shares of the companies li#e Hnitech and ? +ealty etc. have been touching the

ground after the

courtQs verdict. Their initial inflated prices would further ensure that losses to their

investors are

much higher. Those who had invested in Idea ?harti/irtel etc. (The old operators)

meanwhile

would be finding it hard to control their smiles as their shares are roc#eting up after the

verdict.

Thus the verdict is having its say on investors as well.



20/24

0. A//EGATIO#S

CHEA( TE/ECOM /ICE#CES

+ules changed after the game had begun

Cut"off date for applications advanced by a wee#

icenses issued on a first"come"first"served basis

No proper auction process followed no bids invited

+a0a ignored advice of T+/I aw $inistry %inance $inistry

T+/I had recommended auctioning of spectrum at mar#et rates

WE Of A%%e3ations:

C/G says telecom ministry had flouted every canon of financial proprietyrules and

procedures.

+a0a issued licences to ineligible applicants4*@ of &22 licences issued in 2* were illegal as

these cos had disclosed incomplete information submitted fictitious documents and used

fraudulent means to get permits.

/llianK Infratech atacom(Fideocon) Hnitech(Telenor) S Tel oop $obile and ;tisalat were

not eligible for mobile prmits.

Swan Telecom appeared to act as a Rfront companyQ on behalf of /nil /mbhani"led +eliance

Telecom.

Arofit list for spectrum changed in Aun0ab L $aharashtra to favour Swan.Telecom ministry gave undue benefits to +C


21/24

/mount paid by new Telecos for a pan"India licence in 2*4 +s.&-@&crore.

;stimated loss to e!che6uer on selling licences cheap4+s.&crore.

Eas Mone:

Swan Telecom ta#en the licence for +s.&@5, crore and sold @ sta#e to H/;Qs ;tisalat for

1'm(+s.2 cr).

Hnitech ta#en licence for +s.&--& crore and sold -. to NorwayQs Telenor for 1&.&

billion(+s.-2 cr).

S Tel sold ' to ?ahrainQs ?atelco for about 122@m.


22/24

SC 6uestions +s.&cr loans to new licences.

Court as#ed C?I to e!amine the feasibility of probing the allocation of radio spectrum since

2&when ?BA"ed N/ Government was in power.

Budges appealed to be critical of a decision by S?I to lend +s.2@ cr to Hninor.

C?I told to court that they will complete the investigation in 5 monthslater they told they need

- months time.

-. Su33estion

The proceedings of the parliamentary committees should be made available to the

media and publicso that people can understand the issue clearly.

The Government must ta#e the serious and severe decisions especially in these type of

scamsso that no one tries to cheat.

Government has to prove itself by arresting the illegal persons whether they are

anybody.

?oth media and the general public must create an awareness that the government is a

trustee of public money and assets and the people are the real owners.

$edia has played an important role in curving a public opinion .Soalert citiKen and

conscientious media.



23/24

CO#C/USIO#

To sum up it may be said that 2G verdict may have an adverse impact on many

sta#eholders to

it. The same will put the e!isting licence holders and their customersQ and investors and

the

Government in a spot of bother. et the same will go a long way in #eeping a chec# on

unethical political"corporate sector ne!us in future. This in turn will help the country and

its

;conomy in flourishing.

I/IOG+A(H)

WESITE

>ww.>i#ipedia .com

www.scribed .com

www.Dr factor.com



24/24

Dai% #e$s"a"er

&. Times of India 2. %inancial Times

5. ;conomic Times

24 | S A T N A M S I N G H

Areporton2gspectrumscam 2 140513104233 Phpapp02(1)

Documents

Transcript of Areporton2gspectrumscam 2 140513104233 Phpapp02(1)