This Document is an attempt to make available the information on the 2G Spectrum Scam. This book gives a brief idea on the wrongdoings of the Telecom Ministry.
2G Spectrum Scam A Business Ethics Project
Rizvi
2G Spectrum Scam
Presented ByAhmed () Priyanka (19) Jason (20) Sabir () Ateeq ()
2G Spectrum 2G (or 2-G) is short for second-generation wireless telephone technology. Second generation 2G cellular telecom networks were commercially launched on the GSM standard in Finland by Radiolinja (now part of Elisa Oyj) in 1991. Three primary benefits of 2G networks over their predecessors were that phone conversations were digitally encrypted; 2G systems were significantly more efficient on the spectrum allowing for far greater mobile phone penetration levels; and 2G introduced data services for mobile, starting with SMS text messages. After 2G was launched, the previous mobile telephone systems were retrospectively dubbed 1G. While radio signals on 1G networks are analogue, radio signals on 2G networks are digital. Both systems use digital signalling to connect the radio towers (which listen to the handsets) to the rest of the telephone system. 2G has been superseded by newer technologies such as 2.5G, 2.75G, 3G, and 4G; however, 2G networks are still used in many parts of the world.
2G Scam The 2G spectrum scandal involved officials in the government of India illegally undercharging mobile telephony companies for frequency 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 estimated to be 176,645 crore (US$38.86 billion) as valued by Comptroller and Auditor General of India based on 3G and BWA spectrum auction prices which held in 2010. However the exact loss is disputed, Central Bureau of Investigation (CBI) pegged the loss at 30,984.55 crore (US$6.82 billion) in its first charge sheet filed on 2 April 2011, whereas Telecom Regulatory Authority of India in a response to CBI's query said that the Govt. has actually gained 3,000 crore (US$660 million) by selling the spectrum. Kapil Sibal, minister for communications & IT, said in a press conference that there was no loss caused by selling 2G licenses. However in September 2011, CBI argued before the Supreme Court that it was unsafe to read a "no loss" conclusion in the telecom regulator's calculations on irregular spectrum allotment as the methodology adopted admittedly did not take into account the market mechanism. All the speculations of profit, loss and no-loss were put to rest when on 2 February 2012 the Supreme Court of India delivered judgement. The Supreme Court declared the allotment of spectrum as "unconstitutional and arbitrary" and quashed all the 122 licenses issued during tenure of A. Raja, the main accused in the 2G scam case. The court further said that A. Raja "wanted to favour
some companies at the cost of the public exchequer" and "virtually gifted away important national asset". The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating political lobbyist Nira Radia. The government's investigation and the government's reactions to the findings in the investigation was the subject of debate, as were the nature of the Indian media's reactions. Much of the credit of bringing this whole scam into the public light (by pursuing it in the court of law) goes to Subramanian Swamy who is the chief petitioner for this case in the court of law.
Background 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. The policy does not have a provision for auctioning the spectrum 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 Central Bureau of Investigation (CBI) several rules were violated and bribes were paid to favour certain firms while awarding 2G spectrum licenses. The 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 August 2007, Telecom Regulatory Authority of India (TRAI) had given its recommendations which also included recommendations on pricing of 2G spectrum among many other recommendations to Department of Telecommunications (DOT), which is a part of Ministry of Communications and Information Technology, then headed by A. Raja but he did not place the recommendations before the full Telecom Commission which, among others, would have included the Finance Secretary. In 2007, Ministry of Law had written a letter to A. Raja advising him to refer the 2G spectrum allocation issue to the Empowered Group of Ministers (EGoM) but Raja rejected this advice and wrote a letter to the Prime Minister's Office terming the Law Ministry's advice as "out of context." In November 2007 Prime Minister of India Dr Manmohan Singh too 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. 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 (US$924 million). Unitech Wireless, a subsidiary of the Unitech Group, got license for 1,661 crore (US$365.42 million) and later sold 60% stake for 6,200 crore (US$1.36 billion) to Norway based company Telenor.
Parties Involved Politicians Accused Politicians named as accused in the charge sheet filed by CBI in the Special CBI Court, allegations levelled against them by CBI and charges framed against them by the Special CBI court. A. Raja: Political career - Political party DMK, 4 times MP, present constituency Nilgiris, Tamil Nadu, former Union Minister of State (Rural Development - 1999), former Union Minister of State (Health and Family Welfare - 2003), former Union Cabinet Minister (Environment & Forests - 2004), former Union Cabinet Minister (Communication and Information Technology - 2007 & 2009) Allegation - In a joint investigation report prepared by Central Bureau of Investigation (CBI) and Enforcement Directorate (ED) the agencies allege that A. Raja could have received 3,000 crore (US$660 million) as bribe for bringing forward the cut-off date for applications for spectrum from the initial October 1, 2007 to September 25, 2007. The deadline switch eliminated many applications, enabling Raja to favour a few with spectrum. The agencies also alleged that he used bank accounts under his wife's name in Mauritius and Seychelles to channelize the kickbacks he received. In charge sheet filed by CBI it alleges that Raja conspired with the accused, subverted the first-come first-served (FCFS) policy and waywardly redefined it to ensure that Swan and Unitech got 2G licences. He didn’t auction the 2G spectrum or adopt some other market-determined methodology to determine its real valuation and instead benchmarked it to a rate discovered in 2001, when the telecom sector was at a nascent stage.
Charges - Criminal breach of trust by a public servant under section 409, criminal conspiracy under section 120-B, cheating under section 420 & forgery under sections 468 and 471, booked under the Prevention of Corruption Act for accepting illegal gratification. Status - Taken into custody (arrested) by CBI on 2 February 2011 and lodged in Tihar Jail since then (as of February 2012) Applied for bail a number of times but every time the bail got rejected. M. K. Kanimozhi: Political career - Daughter of 5 times Chief Minister of Tamil Nadu M. Karunanidhi, Political party DMK. She is an MP, representing Tamil Nadu in the Rajya Sabha (the upper house of Indian Parliament). Allegation - As per the charge sheet filed by CBI Kanimozhi has 20% stake in her family owned Kalaignar TV, her step-mother Dayalu Ammal owns 60% stake in the same channel. CBI alleges that Kanimozhi was an "active brain" behind the channel's operations[50] and she worked along with former telecom minister A. Raja to get DB Realty promoter Shahid Balwa to circuitously route 200 crore (US$44 million) to Kalaignar TV. According to CBI, Kanimozhi was in regular touch with A Raja regarding launching of Kalaignar TV channel and its other pending works. CBI alleges that A Raja was further pursuing the cause of Kalaignar TV not only for getting registration of the company from Ministry of Information and Broadcasting but also for getting it in the DTH operator TATA Sky's bouquet. Charges - Criminal conspiracy to cause criminal breach of trust by a public servant, criminal conspiracy under section 120-B, cheating under section 420 & forgery under sections 468 and 471, booked under the Prevention of Corruption Act. Status - Taken into custody (arrested) by CBI on 20 May 2011. Granted bail on 28 November 2011 after spending 188 days in judicial custody. Bureaucrats Accused Bureaucrats named as accused in the charge sheet filed by CBI in the Special CBI Court, allegations levelled against them by CBI and charges framed against them by the Special CBI court. Siddharth Behura: Designation - Telecom Secretary when licenses were granted.
Allegation - According to the chargesheet filed by CBI, Behura conspired with A. Raja & several other accused. CBI alleges that when the application deadline time was declared as between 3:30 PM to 4:30 PM, Behura allegedly shut counters to physically block other telecom companies. Charges - Criminal breach of trust by a public servant under section 409, criminal conspiracy under section 120-B, cheating under section 420 & forgery under sections 468 and 471, booked under the Prevention of Corruption Act for accepting illegal gratification. Status - Taken into custody (arrested) by CBI on 2 February 2011 and lodged in Tihar jail since then (as of early February 2012). Applied for bail a number of times but every time bail got rejected. RK Chandolia: Designation – Raja's private secretary when licenses were granted. Allegations - As per the chargesheet filed by CBI, like Behura, Chandolia too conspired with A. Raja & & several other accused. The agency alleges that when the application deadline time was declared as between 3:30 PM to 4:30 PM, Chandolia along with Behura allegedly shut counters to physically block other telecom companies. Charges - Criminal conspiracy to cause criminal breach of trust by a public servant, criminal conspiracy under section 120 B, cheating under section 420 & forgery under sections 468 and 471. Booked under the Prevention of Corruption Act Status - Taken into custody (arrested) by CBI on 2 February 2011. Granted bail by the special CBI court Dec 1, 2011. The high court took suo motu notice of newspaper reports of the bail granted to Chandolia and stayed it on Dec 2, 2011. Corporations Accused Companies named in the chargesheet filed by Central Bureau of Investigation (CBI) in the Special court and charges framed against them. Unitech Wireless: Charges - Criminal conspiracy to cause criminal breach of trust by a public servant, criminal conspiracy under section 120-B, cheating under section 420 & forgery under sections 468 and 471, booked under the Prevention of Corruption Act. Reliance Telecom:
Charges - Criminal conspiracy to cause criminal breach of trust by a public servant, criminal conspiracy under section 120-B, cheating under section 420, and forgery under sections 468 and 471. Booked under the Prevention of Corruption Act Swan Telecom: Charges - Criminal conspiracy to cause criminal breach of trust by a public servant, criminal conspiracy under section 120-B, cheating under section 420, and forgery under sections 468 and 471. Booked under the Prevention of Corruption Act Other companies named in the charge sheet are:
Loop Telecom Pvt Ltd Loop Mobile India Ltd Essar Tele Holding Essar (Parent group of Essar Tele Holding)
Media persons accused Media sources such as OPEN and Outlook reported that two senior journalists Barkha Dutt (Group Editor of NDTV) and Vir Sanghvi (Editorial Director of Hindustan Times) knew that corporate lobbyist Nira Radia was influencing the decisions of appointment of telecom minister. Radia wanted A Raja to be made telecom minister.[67]The two magazines made public the telephone conversations between Nira Radia, Barkha Dutt & Vir Sanghvi. Radia's phones were being tapped by Income Tax department. Critics allege that Barkha Dutt and Vir Sanghvi knew about nexus between government and the media industry but still they supported this corrupt activity and suppressed news reporting the discovery of the corrupt practice. However these people were not named as accused in the chargesheet filed by CBI.
A. Raja Andimuthu Raja (Tamil:
) (born May 10, 1963, Perambalur,
Tamil Nadu, India) is an Indian politician from the Dravida Munnetra Kazhagam (DMK) political party. He was a member of the 15th Lok Sabha representing the Nilgiris constituency of Tamil Nadu. In 2011, TIME magazine listed Mr Raja's 2G spectrum scam as number two on their “Top 10 Abuses of Power” list (just behind the Watergate scandal). The 2G spectrum financial scandal in the Telecommunications and IT Ministry under A. Raja is noteworthy as the largest political corruption case in modern Indian
history, amounting to a record $40 billion loss from under-pricing to the Government of India. The alleged modus operandi was telecom bandwidth being grossly undervalued and offered to a chosen few with vested interests, on a dubious 'FirstCome-First-Served' basis. It is alleged that it should have been put under a transparent auction system, purportedly advised by higher office. The bandwidth-spectrum allocation of 2G bandwidth had later come under criticism for gross irregularities. An FIR filed by the CBI claims that the allocation was not done as per market prices, resulting in a scam worth 200 crore (US$44 million). However, it had been alleged by Arun Jaitley of Bhartiya Janata Party that the scam is worth around 176,000 crore (US$38.72 billion). The Comptroller and Auditor General holds Raja personally responsible for the sale of 2G spectrum at 2001 rates in 2008, resulting the previously mentioned loss of up to Rs. 1.76 lakh crores (US$40 billion) to the national exchequer] In August, 2010, evidence was submitted by the Comptroller and Auditor General (CAG) showing that Raja had personally signed and approved the majority of the questionable allocations. Although the political opposition was demanding his resignation over the 2G spectrum scam, Raja initially refused to resign stating his innocence, and this view was backed by his party president M. Karunanidhi. The financial scam eventually led to Raja's resignation on the 14th of November, 2010. There will be further criminal investigation and action on Raja with reports being filed by the Comptroller and Auditor General (CAG) and the Central Bureau of Investigation (CBI). In 2011, the results of an investigation by retired judge Shivraj Patil, who was appointed by current telecom minister Kapil Sibal, has also found Raja to have been directly responsible for "procedural lapses" regarding the spectrum scandal.[9] The CBI and Enforcement Directorate estimate that Raja could have made as much as Rs 3,000 crore from the alleged bribes. In January and February 2011, Raja's homes and offices were raided by the Central Bureau of Investigation. Computers were reportedly seized as part of the evidence that the CBI plans to present against him. Raja and two former associates were arrested on February 2, 2011. The 3 have been taken to Patiala House Courts for enquiries by the CBI on 3 February 2011 after the end of his custody with CBI, Raja was sent to Tihar Jail for judicial custody until March 3, 2011. His stay in the Tihar Jail was then extended, first to March 17 and then to March 31.under judicial custody.
He was later backed by his party DMK after his arrest and in general meeting in Chennai party passed a resolution in favour of Raja stating that until charges are proven he is not guilty.
Radia tapes controversy The Radia tapes controversy relates to the telephonic conversations between Nira Radia, a political lobbyist and an acquaintance of the (then) Indian telecom minister A. Raja, and with senior journalists, politicians, and corporate houses, taped by the Indian Income Tax Department in 2008–09. The tapes led to accusations of misconduct by many of these people. Nira Radia used to run a public relations firm named Vaishnavi Communications, whose clients include the Tata Teleservices and Mukesh Ambani’s Reliance Industries. The Radia Tapes After getting authorization from the Home Ministry, the Indian Income Tax department tapped Radia's phone lines for 300 days in 2008–2009 as part of their investigations into possible money laundering, restricted financial practices, and tax evasion. In November 2010, OPEN magazine carried a story which reported transcripts of some of the telephone conversations of Nira Radia with senior journalists, politicians, and corporate houses, many of whom have denied the allegations. The Central Bureau of Investigation has announced that they have 5,851 recordings of phone conversations by Radia, some of which outline Radia's attempts to broker deals in relation to the 2G spectrum sale. The tapes appear to demonstrate how Radia attempted to use some media persons to influence the decision to appoint A. Raja as telecom minister. In the recorded conversations between Nira Radia and prominent figures, referred to as the Radia Tapes, several prominent figures are heard in conversation with Radia: Politicians A. Raja, Telecom minister at that time Kanimozhi, Rajya Sabha MP, DMK Achari Businessmen Ratan Tata, Chairman, Tata Sons;
Journalists Barkha Dutt, Group editor, English news, NDTV M.K. Venu, senior business journalist Prabhu Chawla, editor of India Today magazine Rajdeep Sardesai Shankar Aiyar, then with India Today Group Vir Sanghvi, HT advisory editorial director Industry Heads Tarun Das, former CII head Others Ranjan Bhattacharya (foster son-in-law of former prime minister Atal Behari Vajpayee) Suhel Seth, Brand Manager Balaji M.S alias Balaji Subhash (controversial lobbyist from Bangalore involved in Madhu Koda Scam)
Timeline of Raja’s Role The 2G Spectrum Scam is once again in news with media reports of the phone conversation details of top corporate lobbyist Nira Radia establishes Telecom Minister A Raja’s dubious role in awarding telecom licenses at a price lower than the market price. May 16, 2007: A Raja was appointed as the Minister for Communications in Manmohan Singh’s Cabinet. August 28, 2007: The Telecommunications Regulatory Authority of India (TRAI) set out detailed recommendations, primarily urging the government to determine the market prices of Spectrum licenses through a competitive mechanism by auctioning to the highest qualified bidder.
August 28, 2007: The Ministry of Communications, Department of Telecom (DoT), with A Raja as minister rejected the aforesaid TRAI recommendations; and insisted on following the earlier 2001 policy regarding pricing of Spectrum licences (i.e. licenses were to be allotted at fixed June 2001 licence fees, on a first-come-first served basis). In 2001, there were only 4 million cell phone subscribers; whereas by 2007-2008, the number of cell phone subscribers was around 350 million. Thus by fixing license fees at 2001 prices, the Telecom Ministry enabled companies that were allotted licenses to command huge premia. September 20-25, 2007: Raja’s old cronies, notably Unitech, Loop, Datacomm, and Swan (all of whom had had dealings with certain companies floated by his family) applied for the 2G Spectrum licenses. Unitech and Swan had no previous experience in the Telecom industry. December 2007: Two officers who had vigorously opposed the aforesaid DoT Policy (the Finance member and the Secretary of DoT) resigned/retired from government. The two others who had opposed undue favours to Swan were transferred. This cleared the way for an objection-free allotment to Raja’s cronies. January 1-10, 2008: Siddhartha Behura, Raja’s former Secretary in the Environment Ministry, was appointed Secretary of DoT. Ignoring Law Ministry notings urging that the matter be first vetted by a Group of Ministers, DoT issued its nine coveted licenses within 10 days (before Jan 10, 2008), mainly to the above mentioned four crony firms. This was done: In the teeth of notings regarding revenue losses to the government. After unilaterally preponing the application deadline to September 25, 2007. September-October 2008: Swan sold 45 percent of its shares to Etisalat (a United Arab Emirates company) for $900 million (in 2008 around Rs 4,200 crores). The company had obtained its license for Rs 1537 crores.
Unitech Wireless sold 60 percent of its shares to Telenor (a Norwegian company) for Rs 6,200 crores. Unitech had bought its only asset, the spectrum license, from DoT for Rs 1,661 crores. Tata Teleservices sold 26 percent of its shares to DoCoMo (a Japanese company) for Rs 13,230 crores. Based on the aforesaid sale of shares by Unitech and Swan, the market value of these 9 new 2G licenses amount to a total of Rs 70,022.42 crores, for which these 9 companies/conglomerates had paid DoT a total of Rs 10,772.68 crores. Thus DoT lost the difference, amounting to Rs 59,249.74 crores. Thus, by selling these 9 licenses at the lower price Raja caused a loss in the range of Rs 60,000crores to the Indian exchequer. November 15, 2008: The Chief Vigilance Commission issued a show-cause notice to Raja. Thereafter, on the basis of his investigation, the Chief Vigilance Commissioner sent a detailed report to Prime Minister Manmohan Singh, reiterating the demand for Raja’s prosecution. October 21, 2009: The CBI registered an FIR in the scam. November 29, 2008, October 31, 2009, March 8, 2010, March 13, 2010: Dr Subramaniam Swamy wrote to the PM, demanding sanction to prosecute Raja. In the last letter, he pointed out that the Supreme Court on March 12, 2010 (in the government’s SLP) had refused to interfere with the Delhi High Court’s two judgments quashing the government allocation of the 2G Spectrum. March 19, 2010: The Indian government’s Department of Personnel wrote to Swamy that it “would be premature to consider sanction for prosecution at this stage” because evidence collected still being “perused”. April 12, 2010: Swamy filed an instant Writ Petition with the Delhi High Court. April 28, 2010: Details of tapes establishing Raja’s dubious role in the scam surfaces in the media.
Opposition parties demanded that the PM sack Raja. crores to the Indian exchequer.
Telecom companies affected by cancellation of licenses Name of Company
Parent Group
Uninor
Joint venture between Unitech Group of India and Telenor of Norway Unitech Group Joint venture between Shyam group of Indian and Sistema of Russia Owned by Khaitan Holding Group Owned by Videocon group of India
MTS India Loop Mobile Videocon Telecommunications Limited Etisalat-DB Idea Cellular
S Tel
Tata Teleservices
Joint venture between Swan Telecom of India and Etisalat of UAE Aditya Birla Group of India (49.05%), Axiata Group Berhad of Malaysia (15%) & Providence Equity(10.6%)of USA Joint venture between C Sivasankaran of India and Batelco of Bahrain. After the Supreme Court's decision Batelco sold its 42.7% stake toC Sivasankaran company Sky City Foundation Ltd. for $175 million Owned by Tata Group of India
Number of licenses Cancelled 22 21 21 21
15 13
6
3
Current State of affected Companies Etisalat – India Following the $39 billion 2G spectrum scam, Etisalat DB, the Indian subsidiary of the company, was stopped from buying a stake in a Chennai-based company due to objections raised by the Ministry of Home Affairs (MHA). Etisalat DB was not allowed to buy back the 5.27 per cent stake held by Chennai-based Genex Exim Ventures since the home ministry raised objections based largely on security concerns. The MHA had pointed out four issues that needed to be resolved before allowing the company to come into Etisalat DB, a company that got scarce 2G spectrum at allegedly throwaway prices. Loop Telecom The Enforcement Directorate fined a sum of 384 crore (US$84.48 million) on Loop Mobile and Loop Telecom for alleged foreign exchange violations. Loop Telecom is a
subsidiary of Loop Mobile, owned by the Santa Group of Khaitans, having family ties with the Ruias of Essar Group Firm for alleged violation of foreign exchange laws to the tune of about Rs 384 crore in connection with the 2G scam. Loop was issued notices for not intimating the RBI after receiving the money through FDI entities. The second violation committed by them was regarding not issuing shares within specified time period. On 18 August 2011, Loop mobile along with Bharti Airtel, Idea Cellular, Reliance Communications and Vodafone was issued notices by Telecom Regulatory Authority of India (TRAI) for violation of Mobile number portability (MNP) Regulations. According to TRAI, they had received complaints from customers regarding wrong rejection of porting requests by telecom operators and also 10 been charged for a message for requesting porting code through number 1900.
Response to Scam Opposition demands Joint Parliamentary Committee (JPC) - As soon as the Indian media started citing Comptroller and Auditor General of India's report which pegged the loss at 1.76 lakh crore, the Indian opposition parties unanimously demanded formation of Joint parliamentary committee (JPC) to investigate 2G scam. However the Indian government rejected the demand of opposition. Later when the winter session of parliament began on 9 November 2010, opposition again pressed for (JPC) but once again the demand was rejected. The opposition's demand for (JPC) gained further momentum when Comptroller and Auditor General of India's report were tabled in Parliament on 16 November 2011. The opposition blocked parliament proceedings and again pressed for JPC. With Govt again rejecting the demand there was logjam in parliament. Speaker of the Lok Sabha, Meira Kumar tried to break the logjam but her efforts didn't bear any fruit. Finally the winter session of parliament concluded on 13 December 2010. The plan was to introduce 22 new bills, take up 23 pending bills for consideration and passing and withdraw three bills but that didn't happen because the parliament was allowed to function for only 9 hours. In February 2011, after resisting the Opposition demand for over three months, the government finally agreed to constitute a Joint Parliamentary Committee (JPC) to probe the 2G spectrum allocation issue. The government announced it formally on 22 February 2011. Jayalalitha accuses M. Karunanidhi - In early November 2010 Jayalalithaa accused the state chief minister M Karunanidhi of protecting A. Raja from corruption charges and called for A. Raja's resignation. By mid-November, A. Raja resigned.
CAG issues show-cause notices - In mid-November the comptroller Vinod Rai issued show-cause notices to Unitech, S Tel, Loop Mobile, Datacom (Videocon), and Etisalat to respond to his assertion that all of the 85 licenses granted to these companies did not have the up-front capital required 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 revoked, as they are currently providing some consumer service
