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2G Spectrum Scam

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The 2G Spectrum Scam – What’s Spectrum ?

This article is about 2G Spectrum Scam. Spectrum is a range of radio waves used for communication. It exists all around us. The radio shows you listen to travel on these waves. So also the data you transmit through your phones. The texts you send. The tweets you put out. The Facebook updates & the web pages you browse. So with all this traffic going back & forth, the signals could end up bumping into each other. Anybody broadcasting signals at any frequency they like would mean absolute chaos. That’s where the government comes in.

So what’s 2G ?

Now, imagine spectrum as a highway & bands as lanes on that highway to regulate traffic or data. The government has to decide which bands can be used for which type of service. So what’s 2G ?. It’s 2nd generation wireless technology. Different technologies were developed to leverage different bands. Now, how does a mobile company access these bands on the highway or spectrum ?. You need a license to operate on the highway. Also, you need to pay a fee for spectrum. The government has 2 options here. Either auction spectrum to companies that use that spectrum to offer services. Or allocate spectrum to companies on a 1st come 1st serve basis.

How did the 2G Spectrum Scam come to be ?

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In 2007, the government decided it will give out licenses on a 1st come 1st serve basis. Companies were asked to apply for licenses before 1st October 2007 & pay license fees. It was decided that this would be a spectrum-linked license. It means the company that got the license would get the spectrum for free & didn’t have to pay separately for it. Under license conditions, the mobile operators had to meet certain rollout obligations. Which was to cover 10% of the district headquarters in the 1st year. 50% of the district in 3 years.

On 10th January 2008, The Department of Telecom under Minister A Raja arbitrarily brought forward the cutoff date from 1st October 2007 to 25th September 2007. Thus a large number of applications received after September 25th  became ineligible. The CBI which investigated the case alleged Minister Raja advanced the cut-off date. It’s done to favor firms like Unitech & Swan telecom in return for bribes. Later the same day the Department of Telecom posted an announcement on its website. The announcement says that those applicants eligible under the new 25th September deadline will have to report to Sanchar Bhawan between 3:30 p.m. & 4:30 p.m. to be issued licenses. It’s alleged that Raja’s secretary AK Chandolia & telecom secretary Siddharth Behura physically shut counters during this 1-hour window. This is done to block other telecom companies. Also, the licenses were given in 2008 at 2001 market rates.

So who benefited from 2G Spectrum Scam ?.

Unitech. Unitech Wireless had no experience in the telecom sector. The company got the license for a throwaway price of Rs. 1,661 crore. It sold a 60% stake to Telenor Asia for Rs. 6,200 crores. Thus making a windfall without even rolling out its mobile service.

Swan.  Swan, the telecom arm of DB Realty also benefited from A Raja’s largesse. The company had no experience in the sector. But was awarded a 2G license for Rs. 1,500 crores. Swan sold 45 % of its stake to UAE-based Etisalat for Rs. 4,500 crores.  Swan did not meet its rollout obligation. It didn’t even build a single mobile tower. Swan telecom is alleged to have given kickbacks to the tune of Rs. 200 crores through a maze of companies to Kalaignar TV owned mainly by DMK MP & party patriarch Karunanidhi’s daughter Kanimozhi & his wife Dayalu Ammal. The CBI while arguing Kanimozhi’s complicity in the conspiracy has referred to the phone conversations in the Radia tapes that reveal Kanimozhi lobbying hard for A Raja to be made Telecom Minister again when UPA returned to power in 2009.

Reliance ADAG Telecom. It’s alleged that Swan telecom acted as a front for Anil Ambani-led Reliance telecom while applying for licenses in 13 operating areas. Since Reliance Telecom was already operating all the service areas for which Swan had applied for licenses. The application should’ve been declared ineligible.

Accused Number 1

Then Telecom Minister A Raja & once the DMK’s rising star. The CBI says acted against the advice of the TRAI, the law & finance ministries & even misled then Prime Minister Manmohan Singh. Raja is alleged to have used his wife’s bank accounts in Mauritius & Seychelles to deposit money he received as kickbacks. It was the Comptroller & Auditor General that quantified the presumptive loss to the exchequer in 2G spectrum allocation at Rs. 1.76 lakh crores. This figure of Rs. 1.76 lakh crores were arrived at based on revenue realized through the 3G auction.

Conclusion – The 2G Scam

Rs. 1.76 lakh crore came to define the scam in popular perception. The Joint Parliamentary Committee looking at the pricing & allocation of telecom licenses dismissed the loss calculation saying the CAG cherry-picked TRAI recommendations to establish that 2G & 3G prices are comparable. While the calculation of presumptive loss itself may be contested the 2G scam is widely viewed as the biggest case of state corruption. In 2011, Time magazine listed the case at number 2 on their “Top 10 abuses of power” list just behind the Watergate scandal which cost Richard Nixon his presidency.

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