What the 2G spectrum case is all about

Following is a primer on the second generation teleom spectrum allocation case that has resulted in the arrest of former telecom minister A. Raja and his DMK party colleague and daughter of former Tamil Nadu chief minister M. Karunanidhi's daughter Kanimozhi and 12 others:

The issue dates to 2008 when nine telecom companies were issued scarce airwaves, a national resource, and licences for 2G mobile phone services at Rs.1,658 crore (less that $350 million) for a pan-India operation. As many as 122 circle-wise licences were issued.

The opposition said by giving airwaves cheap and in a controversial manner of first-cum-first-served basis, the exchequer had lost billions of dollars. It also objected to the arbitrary advancement of the cut-off date for filing applications to suit some firms.

But Prime Minister Manmohan Singh himself defended Raja's decision and said May 24 last year that his communications minister (Raja) had done no wrong and had only implemented the policy that was already in place. No norm was flouted, he added.

The opposition nevertheless stepped up its attack with two examples on 2G spectrum sale:

* A new player, Swan Telecom, bought licences for 13 circles with the necessary spectrum for $340 million but managed to sell a 45-percent stake in the company to UAE's Etisalat for $900 million. This swelled its valuation to $2 billion without a single subscriber.

* Another new player, Unitech, paid $365 million as licence fee but sold a 60-percent stake to Norway's Talenor for $1.36 billion, taking its valuation to nearly $2 billion, again without a single subscriber.

Similarly, another licensor, Datacom, later became Videocon Mobile and Stel now has a large stake by Bahrain Telecom. The other companies are Tata Tele, Idea Cellular, Loop Telecom, Shyam Telelink and Spice.

The issue cropped up again after the auction of airwaves for third generation (3G) services that fetched nearly $15 billion and for broadband access, which secured over $8.5 billion to the exchequer. Accordingly, the the notional loss on 2G was estimated at $12.8 billion to $38 billion.

This estimate was arrived at by the Comptroller and Auditor General of India and leaked to some sections of the media, forcing Raja, who was holding the communications and IT portfolio, to resign Nov 14 from he union council of ministers.

The official auditor also said the entire process of spectrum allocation was undertaken in an extremely arbitrary manner and that the advice of industry watchdog, Telecom Regulatory Authority of India (TRAI), was ignored and misused.

Meanwhile, Janata Party leader Subramanian Swamy filed a suit in the Supreme Court seeking judicial intervention in giving directions to the government and probe agencies to act against Raja.

Acting on the petition, the Supreme Court had asked the solicitor general last October why Prime Minister Manmohan Singh had not responded in a timely manner to a request by Swamy to sanction proceedings against Raja.

Then in December, the apex court itself decided to monitor the probe that was being conducted by multiple agencies, including the CBI and the Enforcement Directorate.

The CBI immediately raided the house of Raja as also the premises of his former aides Siddhartha Behura and R.K. Chandolia in New Delhi.

Then on Feb 2, it arrested Raja, Chandolia and Behura, and filed charges against nine people. Apart from Raja, Chandolia and Behura, the others named are Swan Telecom promoter Shahid Balwa and director Vinod Goenka, Unitech director Sanjay Chandra and three officials from the Reliance Anil Dhirubhai Ambani Group -- Gautam Doshi, Hari Nair and Surendra Pipara.

They were all then taken into custory after the courts rejected their bail pleas.

Then, in the last week of April, former Tamil Nadu chief minister M. Karunanidhi's daughter Kanimozhi was also named co-conspirator, along with Sharad Kumar of Kalaignar TV, Karim Morani of Cineyug Films, and Asif Balwa and Rajiv B. Agarwal of Kusegaon Realty.

The probe agency claimed to have unearthed an illegal money trail that moved from Kusegaon to Cineyug, all part of the DB Group that promoted Swan Telecom, ending with Kalaignar TV.


Source Yahoo