Did Raja have the last laugh?

2g spectrum auction,

Table of contents

Lessons from the 2G flop show

A flop auction does not mean there was no 2G scam 2G auction: Sauce for the goose, but not for the gander 2G auction: 8 quick takeaways from Kapil Sibals flop show 04 07 08

How the auctions played out

2G auction: How failure may have been pre-programmed Govt vs telcos: Reading between the lukewarm 2G auctions 2G auctions: Does the govt have answers to these questions? 2G auctions: Rs 40K cr a distant far before a paltry Rs 9,400 cr Reserve price too high, 2G auction will be over on first day: Mittal 2G spectrum: Videocon gets six circles for Rs 2,222 cr 2G auctions: DoT may approach Trai to reprice spectrum 10 12 13 14 15 16 17

Spectrum stealing and more

2G scam: How the NDA made spectrum stealing easy Why is CJI taking on CAG with a flawed loss theory Raja gives HC 10 major reasons to quash his 2G trial 19 25 27

Copyright 2012 Firstpost

Lessons from the 2G flop show

Copyright 2012 Firstpost

A flop auction does not mean

there was no 2G scam

The mere fact that the latest spectrum auctions flopped does not mean A Raja was right with his pricing or that there was no big 2G scam.
R Jagannathan, Nov 15, 2012

f the pink papers had their way, there would be no such thing called the 2G spectrum scam; there would be no such thing called revenue loss; the Comptroller and Auditor General (CAG) would be labelled economically illiterate precisely the kind of language Andimuthu Raja has used in the past with those who did not agree with his interpretation of the first-come-first-served (FCFS) policy on allotting spectrum. An editorial in this mornings Economic Times makes some good points, but equally bad ones, now that it is clear that the spectrum auction has been a resounding flop.

The editorial, titled RIP, 2G Scam, jumps to conclusions based on just the fact that the auction was a flop. Among other things, it makes the following points: One, attempting to maximise government revenue by jacking up spectrum prices is futile. It leaves telecom with reduced competition and suboptimal use of spectrum. Two, the CAGs estimate that the government would have netted Rs 1,76,000 crore if it had auctioned the 2G spectrum instead of using the first-come-first-served (FCFS) method is presumptive tosh.
Copyright 2012 Firstpost

Three, the only 2G scam relates to manipulation by A Raja of the FCFS policy to create his own priority list of licensees for allocation of spectrum. But in the popular imagination, this was not the 2G scam; rather, the scam involved Rs 1,76,000 crore. That scam, it is now clear, was pure myth. Each assertion is a half-truth at best. It is nobodys case that the purpose of spectrum auctions is to maximise government revenues. However, it can also be nobodys case that auctions are not a good way to hawk scarce spectrum. The twomaximising revenues and auctionsare not the same thing. The fact that the current auction flopped is not a justification for abandoning auctions altogether. It only means the auction was timed wrongly, or designed sub-optimally. Like selling public sector shares, if you sell the in a bad market, you get lower prices. If you hold on till the markets improve, you get a better price. Auctions cannot be expected to yield huge revenues if you time them badly. If you want a better price, you wait for the right time. Alternatively, you can auction spectrum even in a bad market by putting in a provision for price revisions periodically. It will then not matter even if spectrum is sold cheap today. This is what happens with long term oil or gas contracts there is a provision for regular revisions based on market prices. The point about sub-optimal use of spectrum if it is sold at a high price is, to use ETs own colourful expression, pure tosh. It is when you price spectrum high that the owner will try to use it more effectively, and create more uses and applications for it. When it is cheap, it will be wasted. Try this logic with water, or oil and gas, and see if selling them cheap gets you better usage. The only thing different about spectrum is that if you dont use it, it is wasted for the period it is not used. So selling by auction is not the problem. If you are able to re-price spectrum at regular intervals, we will neither have sub-optimal usage nor overpricing. More importantly, a high reserve price is only the only way to auc-

tion spectrum: you could do it by revenue share too. This way, the damage to balance-sheets is not upfront. This is how the Delhi and Mumbai airports were privatised. The second point, that CAG was talking through his hat while estimating a Rs 1.76 crore presumptive loss, is partly valid. The operative word is partly. The figure is an estimate based on the last discovered price for spectrum the 3G auction of 2010. That price may have been too high, both because the telecom market was bullish and the spectrum offered for auction was too small, but in a market like spectrum where auctions are few and far betweencan there be regular price discoveries as in the stock markets? The CAG used the best available benchmark at that time. The other point, that the public identifies the figure of Rs 1.76 crore as the real scam and not Rajas fiddling with the FCFS scheme, is correct. The CAG certainly is guilty of popularising this figure though it was the media that tomtommed it. However, one should see even this in the right light. Would the public ever have known about the big decisions being taken with such opaque processes if the figure had not caught everybodys imagination? If the CAG had merely said that, look, the FCFS scheme has been tinkered with, and opaque processes were followed, the report would have been buried and the public left totally unaware of the conduct of its highest public servants. There is an ever present danger of overhyping a scam, but without the hype there would have been no correctives too. We now know that Raja hijacked the FCFS for his own ends, and even bamboozled the Prime Minister and the finance minister. These facts would never have been established without the CAGs sharp spotlight on Rajas activities. It was the alleged scale of the scam that forced a real rethink. For this we should be willing to forgive the CAG for creative licence. A related point is this: ministers and bureauCopyright 2012 Firstpost

crats must have a way of knowing what they are sacrificing to achieve what purpose. If, for example, the idea is that by keeping spectrum prices low, we will achieve so much teledensity, then the costs and benefits are easy to see. But what did Raja do? He merely asserted that his way of pricing spectrumwithout even adjusting for inflation between 2001 and 2008was the best. Can policy be evolved in such a slapdash fashion? Consider the Union budgets own estimates of revenue forgone due to various tax concessions. These figures are also presumptive tosh but without these numbers, can we really evaluate the value of tax concessions? Look at what a company would do in the same circumstance. To achieve market share, it may price a product low, even below cost, but it weighs the cost of selling low versus the presumptive gain in market share. Did Raja, or Manmohan Singh or P Chidambaram ever do such a simple exercise to arrive at their spectrum price? Surely, public resources cannot be handed out on such flimsy logic or assumption? Surely, the government must do more homework before it takes such decisions? Surely, the CAGs estimate of presumptive lossif known before pricing spectrum at 2001 priceswould have impacted a final decision on pricing? To use the flop auction to say that spectrum is priced too high is completely unwarranted for the following reasons.

First, remember, spectrum is being sold for 20 years. Does anyone seriously believe that prices will not rise as usage grows, and especially if India grows at 7-9 percent once the current downturn is over? Second, in a country of 1.2 billion people, where every passing year is only going to see more usage of spectrum, it would be downright stupid to price spectrum low today because business confidence is low. Third, the price of spectrum was kept low by Raja in order to enable some Indian promoters to get a free ride on foreign money as was evident in cases where shares were immediately sold at high premia when there were no assets beyond spectrum in the kitty. Teledensity was the ostensible reason for low prices, but the real reasons lay elsewhere. Otherwise, why would the PM and the FM take the exact opposite position to Rajas earlier only to be bulldozed by the DMKs coalition pressures. Make no mistake: Raja did not do the country a favour by selling spectrum cheap. The value of the loss or the scam may not be Rs 1.76 lakh crore, but whatever it was, it was huge. The flopped auction is no vindication of Rajas stance on pricing. The 2G Scam is not going to RIP, never mind what the pink papers hope.

Copyright 2012 Firstpost

2G auction: Sauce for the goose,

but not for the gander

FP Staff, Nov 15, 2012 government since it did not put up all available spectrum for auctions. The auction revenue is important for the government as it is now running against time to rein in fiscal deficit at the targeted 5.3 percent of GDP. A miss in this target, which has now become a clear and present danger, is sure to result in a sovereign rating downgrade by rating agencies. Why is this pain resulting in a gain in telecom shares? Because investors expect this will force the government to scale down the high reserve price. CNBC TV18 yesterday reported that the department of telecom is expected to make a fresh reference to sector regulator Trai on the contentious spectrum pricing, which has been blamed for the flop show of the auction. We believe an unsuccessful 2G auction shows that there is limited demand for spectrum at high prices. We believe the government will likely reduce the reserve price in circles where there was not even a single bid, said the Goldman Sachs research report. Since the winning price of this auction will be linked to renewal spectrum price and for onetime charge, we now see downside risks to potential regulatory payments for incumbents like Bharti/Idea, it said. It sees limited demand for the refarming of spectrum in the 900 MHz band. The brokerage has a buy rating on Idea.

hile the government is scrambling for ways to increase its revenue from 2G spectrum after the failure of the auction, investors in telecom company shares are rejoicing. Shares of Bharti Airtel, Idea Cellular and Videocon Industries, however, rose up to 3.5 percent after telecom spectrum auction failed to evoke the expected response from the players. The auctions, which got over on just the second day of bidding, may generate less than a fourth of the revenue target initially set by the government, a Firstpost article had noted.

According to reports, the auctions would generate only about Rs 9,400 crore in revenues for the government as against its initial target of Rs 40,000 crore. The Mumbai, Delhi, Karnataka, and Rajasthan circles attracted no bidders. These circles account for 51 percent of the reserve price, said brokerage Goldman Sachs. The only circle for which the bids had exceeded the reserve price was Bihar. The GSM lobby group Cellular Operators Association of India (COAI) had given three reasons for the failure of the auction: artificially high reserve price of Rs 14,000 crore for 5 mhz of spectrum; participation in auctions by only those telcos which had lost licences and were compelled to win back spectrum to stay in business; and creation of artificial scarcity by the

There was probably a degree of collusion or prior agreement among the big players that they will not bid seriously. This needs to be investigated, a Firstpost article had earlier noted.
Copyright 2012 Firstpost

2G auction: 8 quick takeaways

from Kapil Sibals flop show

R Jagannathan, Nov 14, 2012 ness optimism was rising, this time it was the exact opposite. Moreover, the auction may have fared better without a high floor price.

he two people who will be thrilled with Wednesdays failed spectrum auctions will be Andimuthu Raja and Kapil Sibal. The former because people will say maybe his spectrum price wasnt all that wrong. The latter because he can now claim vindication for his zero-loss theory. Actually, the flop show is a vindication of neither Raja nor Sibal. Raja is in the dock not for his flawed pricing, but for the way he allegedly fiddled with the first-come-first-served process to favour some parties. Sibal is wrong not because the loss figure provided by the Comptroller and Auditor General (Rs 1.76 lakh crore) was way off, but because he defended the indefensible: sale of 2008 spectrum at a non-market determined price of 2001. It was not something the PM and FM wanted, but they changed their stories after Raja was caught fooling around with the process and sent to jail. Here are a few observations on the failed auctions and the implications. First, there was probably a degree of collusion or prior agreement among the big players that they will not bid seriously. This needs to be investigated. Second, it is highly unlikely that the government would not have known how the bids would go. Bharti Chairman Sunil Mittal gave the game away when he said the auction would be over in a day. The government was clearly programming for failure after the roasting it got in CAG reports and the cancellation of licences by the Supreme Court. By allowing the bids to fail, the government can now claim the courts and CAG were wrong. Third, the failure is more the result of wrong timing and bad investment climate both of which are the result of the UPAs inability to manage its policies right over the last three years. If the 3G auction timing came when busi-

Fourth, there is no case for pricing spectrum low especially when India has achieved high teledensity. Sooner or later, the same bidders who collectively decided to make this auction a flop will return to the table when they need additional spectrum with the rise of data and other traffic. Fifth, the government should not now make the mistake of lowering the reserve price. Instead it should allot spectrum at the reserve price to whoever needs it. It can be first-comefirst-served again and this time it could work better since players would have no opportunity to collude. The government should resist the cartelisation of spectrum buyers. Sixth, since the one-time spectrum fee and other prices are decided by the auction, the government will have to fix new prices for these. It should now fix them on the basis of the reserve prices and not buckle under the pressure from industry. Seventh, some policy changes will change the picture. If, for example, 100 percent stake is allowed to foreign players, it would be impossible for the spectrum price to remain unbid for long. This is a key correction needed in policy since it is clear that many Indian players do not have the money to grow the market and are in the game only to collect rents. Eighth, the fact that big players like RCom and Reliance did not bid means the failure was preordained. Wonder why the government never asked why. The first clue came when the CDMA auction had no bidders. The conclusion is inescapable that this auction was programmed for failure. Sibal should take responsibility for it.
Copyright 2012 Firstpost

How the auctions played out

Copyright 2012 Firstpost

2G auction: How failure may

have been pre-programmed

The mere fact that the latest spectrum auctions flopped does not mean A Raja was right with his pricing or that there was no big 2G scam.
R Jagannathan, Nov 15, 2012

ew Delhi: On the morning after the dismal failure of the 2G spectrum auctions, when the government is wondering how to bridge the mounting fiscal gap and telcos are assessing the spoils, one pertinent question begs to be answered: how committed was the government itself to avoid a flop? Telecom Minister Kapil Sibal was heard saying on Wednesday that he went entirely by the recommendations on spectrum pricing given by regulator Telecom Regulatory Authority of India (Trai). In essence, he implied that if Trai had recommended a much lower base price for 2G

spectrum, these auctions could have been much more successful. Trai did, under two different chairmen, lower the base price from Rs 18,000 crore to Rs 14,000 crore but that did not seem to make much of a business case for the telcos. The same prices, however, seemed to make huge sense in the 3G auctions of 2010. Sibal himself asserted that market conditions were different in 2010 from those prevailing in 2008 and more so in 2012. Was the minister trying to say that the basis of pricing itself was flawed? And if so, why did it not make the changes needed, especially
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when the Supreme Court in the presidential reference said that such decisions were best left to executive judgement? Another question is: did Sibal do anything to persuade Indias telecom billionaires to participate in these auctions to ensure they did not fail? Sunil Mittal, promoter of the countrys largest telco Bharti Airtel, had famously predicted just a week before the auctions that the entire process would be over on the first day itself and that his company was participating merely because it did not want to be seen as boycotting the auction process. True to his words, Mittal won spectrum in just one circle the C circle of Assam. His total outgo? A paltry Rs 8.7 crore, according to calculations done by Goldman Sachs. Mukesh Ambani, the other significant billionaire who could have made the auctions a roaring success, also chose to stay away, as did his brother Anil. This, when the senior Ambani needs airwaves to offer voice services to supplement its 4G services and has enough cash reserves to buy airwaves even at the current base price. When the moneybags did not even participate, how could the auction have been a success? Of the 13 telcos doing business in India, only five participated and even among these five, three were those which had lost licences after the Supreme Court cancelled all licences awarded by A Raja in 2008. These three, Telenor (through joint venture company Telewings), Videocon Telecom and Idea Cellular had not much of an option since non-participation would have meant winding up their respective telecom businesses. This leaves only two playersBharti and Vodafonewho participated to win additional spectrum. Bharti was a fringe player but Vodafone surpassed all expectations by winning 14 circles entailing an outgo of Rs 1,127.9 crore. It has bagged spectrum in one category A circle, 7 category B circles and six category C circles. So why did Vodafone bid aggressively? Why did the base price make sense for only one incumbent which did not lose any license to the SC

order? Four analysts of Goldman Sachs said in a note to clients this morning that We believe Vodafone is strengthening its spectrum footprint by acquiring contiguous spectrum in 14 circles as it leads to lower opex/capex. Bhartis bid in just one slot in one circle in our view was an indication that it is not boycotting the auction. An industry expert pointed out that Vodafone perhaps thought this was as good a price as any to get additional spectrum in those circles where it had only 4.4 Mhz till now. Vodafones official statement explained that the company participated in the auctions to secure additional spectrum in many circles where we have not received any new 2G spectrum since 2008. Our customers grew in that period from 60 million to 153 million today. So Vodafone saw the auctions as an opportunity to get precious spectrum virtually at the base price. If Vodafone could invest much money in getting the required spectrum, why did Bharti not see the same value in acquiring a precious resource, at least in some circles? The Goldman analysts said that Telenor secured 5 Mhz of spectrum in Andhra Pradesh, UP East, UP West, Bihar, Gujarat and Maharashtra by paying Rs 4,018.3 crore (or 2.3 percent of Telenors market cap) but the company will cease operations in circles Mumbai, Kolkata and West Bengal, where it was not awarded licences. Although Videocon acquired spectrum in six circles, we believe a greenfield operator with limited footprint is unlikely to lead to any higher competitive intensity, particularly at these tariffs. The government has been able to collect less than a fourth of the targeted revenues from these auctions at Rs 9,400 crore and even this money may not flow into its coffers entirely since it will have to refund licence fees to those who return spectrum taken earlier. Also, telcos are allowed to pay only 33 percent of the due amount in the first year, and the rest in instalments.

Copyright 2012 Firstpost

Govt vs telcos: Reading between

the lukewarm 2G auctions

Telecom industry experts pointed out that the government may not mop up anything more than Rs 10,000 crore from this auction.
Sindhu Bhattacharya, Nov 14, 2012 climbed by a mere Rs 44 lakh over the base price of Rs 44.21 crore for 1.5 mhz pf spectrum.

rom all available data, it appears that bidding in the ongoing 2G auctions is currently on in only one of the 22 circles, which is Bihar.

The high reserve price of Rs 14000 crore for 5 mhz of 2G spectrum has ensured quite a lukewarm response; the Centre has already had to cancel auction of the CDMA airwaves in the 800 MHz band since all bidders pulled out at the last minute. Even for 2G or 1800 mhz, only five telcos are in the fray. Initially, the Government was eyeing Rs 40,000 crore in revenue from the sale of airwaves but now unless Telenor and Videocon get aggressive, generating even Rs 10,000 crore would be tough. In all, five telecom service providers (telcos) are in the frayincumbents Bharti, Vodafone and Idea and also Telenor (through new company TeleWings) and Videocon Telecom. If one were to go purely by the amount of earnest money deposit (EMD) each company has made before the start of the auctions, Idea should have been the most aggressive bidder since it has shown its intent to bid for about 97 percent of a total 22 circles. But this could well be misleading, since industry sources now tell us Idea deposited the EMD enough to bid for only 7 circles. And just before the last date for EMD expired, the Department of Telecom (DoT) changed the rules of the game to add the money that telcos had deposited with it earlier for licenses which were eventually cancelled by the Supreme Court in February this year.

The Government began conducting auctions for 1800 mhz spectrum band on Monday but the high reserve price deterreed potential bidders and at the close of the first day, no circle other than Bihar saw excess demand. Loosely translated, this means for no circle was demand more than the spectrum available. By Monday evening, the Government had managed to collect revenue of just over Rs 9200 crore, less than a fourth or less than 25 percent of the revenue target it had initially set for these auctions. This morning, auctions recommenced at around 9 am with the 8th round. Telecom industry experts pointed out that the government may not mop up anything more than Rs 10,000 crore from this auction. By close on Monday, Bihar circles price had

Copyright 2012 Firstpost

2G auctions: Does the govt have

answers to these questions?

Sindhu Bhattacharya, Nov 12, 2012

here could be all-round confusion now in the telecom sector, with 2G spectrum auctions generating less than a fourth of the Governments original revenue target and many circles not witnessing any bidding at all. Not only has the Government been left with just about 25 percent of the revenue target at Rs 9200 crore (till the end of the fifth round of bidding today), it now has to deal with multiple issues which this auction has thrown up. Till the end of the fifth round of bidding today, only 55 percent of auctioned spectrum blocks had received bids. Total spectrum blocks up for auction are 176. Some questions todays auction has thrown up: 1: How will the Government now determine at what price to charge the one-time fee for excess spectrum in circles like Delhi, Mumbai, Karnataka? The plan was to use the market discovered price from the 2G auctions to charge incumbent telcos for excess spectrum they hold. Now that there is no market discovered price, what does the Government do? Will it lower the base price in these circles, hold another bid? 2: Will telcos move the courts challenging the

auction process itself since the Supreme Court is already hearing a case on why all the available spectrum was not put up for auction? Telcos who win the circles of their choice in todays auctions could consider challenging the reserve price in case there is a new calculation for those circles where there have been no bids 3: How will Government bridge further gap which will emerge when its Rs 31,000 crore revenue generation target from one-time charge does not materialise? Perhaps Telecom Minister Kapil Sibal will have to search for answers for both, GSM and CDMA spectrum issues, since the same story has played out in the CDMA space earlier, where auctions had to be scrapped since the two interested bidders pulled out at the last moment. Are we really looking at a reduction in the GSM airwaves reserve price then? And consequently a reduction in that for CDMA as well? This remains to be seen. Listed below are the circles in which bids were made.

Copyright 2012 Firstpost

2G auctions: Rs 40K cr a distant

far before a paltry Rs 9,400 cr

The much-talked about auction of 2G spectrum after the cancellation of 122 licenses by the Supreme Court has been a washout given a lukewarm response by telecom firms.
Sindhu Bhattacharya, Nov 14, 2012

he 2G spectrum auctions, which got over on just the second day of bidding, may generate less than a fourth of the revenue target initially set by the government. According to reports, the auctions themselves would generate only about Rs 9400 crore in revenues for the government but if the government honors its commitment of refunding license fee to those telcos who lost licenses after the Supreme Court judgement of February this year, the revenue earned would be quite paltry. As per industry estimates, if the government refunds this money to all eligible telcos, it will have to fork out Rs 7,211 crore out of the Rs 9,400 crore it will earn. So where does this leave the ambitious target of generating Rs 40,000 crore from spectrum auctions in this fiscal? Reacting to the dismal industry participation in auctions, GSM lobby group Cellular Operators Association of India (COAI) said this evening

that there were three reasons for the dismal response to auctions for 1800 mhz spectrum: artificially high reserve price of Rs 14,000 crore for 5 mhz of spectrum; participation in auctions by only those telcos which had lost licenses and were compelled to win back spectrum to stay in business; and creation of artificial scarcity by the government since it did not put up all available spectrum for auctions. Terming the offer by the government to liberalise spectrum as another red herring, COAI said, All spectrum held by GSM operators has already been liberalised as per the existing License conditions. The association also made it clear that had the government harmonized the spectrum to international standards and allowed for Extended GSM to be provided on the 800 MHz spectrum, there would have been bidders even in the CDMA band.
Copyright 2012 Firstpost

2G auction will be over on first day: Mittal

Next week, the govt is auctioning spectrum at a minimum bid price of Rs 14,000 crore for 5 MHz of airwaves for all the countrys 22 telecom zones. The auction base price is more than seven times that the carriers paid in earlier sales.
urgaon: The reserve price of Rs 14,000 crore set for airwaves is too high and the auction of 2G spectrum will be over on the first day itself, Bharti group Chairman Sunil Bharti Mittal said today.

Reserve price too high,

PTI, Nov 7, 2012 1.06 lakh crore, Mittal said: Auction will be over on first day. There is no need to be aggressive. When asked why then Bharti is taking part in bidding if the price is too high, he said: We didnt want to be seen as boycotting auctions. Airtel, Vodafone, Videocon and Tata Teleservices are among the telecom biggies that have applied to bid in the auction, but Reliance Industries and Russias Sistema surprised by staying away. No player has applied for pan India licence, while Airtel and main rival Vodafone have only bid for additional spectrum in select few circles. Other players like Videocon, Telenor and Idea have bid for new circles and additional spectrum. As far as the CDMA technology is concerned, there are no bidders left in the fray after the pullout of Tata Teleservices and Videocon. The 2G spectrum was allotted in January 2008 at an entry fee of Rs 1,658 crore and total revenue generated was about Rs 9,000 crore. In February this year, the Supreme Court had cancelled 122 licences granted by former telecom minister A Raja on the ground that they were issued in a totally arbitrary and unconstitutional manner. The court has given the government time till 18 January to complete the auction.

Reserve price is too high and we have been saying that since day one, Mittal told reporters here on the sidelines of the World Economic Forum on India. Next week, the government is auctioning spectrum at a minimum bid price of Rs 14,000 crore for 5 MHz of airwaves for all the countrys 22 telecom zones. The auction base price is more than seven times that the carriers paid in earlier sales where airwaves were bundled with telecom permits. Ruling out the repeat of the highly competitive bidding for the 3G and BWA (also known as 4G) spectrum in 2010, which went on for over a month fetching the government a total of Rs

Copyright 2012 Firstpost

2G spectrum: Videocon gets

six circles for Rs 2,222 cr

On second day of the spectrum auctions, which had begun on Monday.
Sindhu Bhattacharya, Nov 14, 2012

ew Delhi: Videcon Telecom has bagged 2G spectrum in six circles and would be shelling out Rs 2,222 crore as total spectrum cost.

are concerned. Today was the second day of the spectrum auctions, which had begun on Monday. Since morning, only one circleBiharkept up bidders interest since industry sources said Telewings and Videocon were both after this circle. The auctions finally got over a little after 6 pm today. It would be interesting to see what Videocon does now since there has been a lot of speculation about the companys links with Mukesh Ambanis Reliance Industries and the latters interest in a possible acquisition of Videocons voice business to further his own 4G ambitions.

Confirming this to Firstpost, CEO Arvind Bali said the circles his company has bagged are Uttar Pradesh East, Uttar Pradesh West, Madhya Pradesh, Bihar, Gujarat and Haryana. The company had lost 21 licenses after the Supreme Court cancelled 122 licenses awarded by former telecom minister A Raja in February this year. After today, it can operate in seven circles Punjab is already operational. Bali said with todays spectrum in Videocons kitty, the company will cover 50 percent of the countrys population as far as mobile services

Videocon already managed to surprise many with abrupt withdrawal of applications for CDMA spectrum auctions earlier. Industry experts had said earlier that Videocon would put in only as many bids in GSM auctions where they get back the Rs 1658 crore they earlier paid as license fee and which the government has said will be adjusted against the amounts submitted for the upcoming auctions. With the Rs 2,222 crore investment this evening, this surmise does not appear to be far wrong.

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2G auctions: DoT may approach

Trai to reprice spectrum

There is every possibility that spectrum in 800 and 900 mhz bands also becomes cheaper. But the industry, as of now, is keeping its fingers crossed.
Sindhu Bhattacharya, Nov 14, 2012

he Department of Telecom (DoT) is expected to make a fresh reference to sector regulator Trai on spectrum pricing, after the flop show of 2G auctions which finished this evening. CNBC-TV18 quoted senior sources to say that this reference could be made as early as Friday. There are several issues that need to be thrashed out with respect to spectrum pricing, now that it has been made abundantly clear that the auctions were a dismal failure at the current 2G (1800 mhz band) reserve price of Rs 14,000 crore for 5 mhz of spectrum. First, in most of 22 telecom circles, the reserve price was not exceeded in these auctions so market experts say this technically means there is no market discovered price in these auctions. The reserve price was not exceeded because there was less demand compared to supply. Now, Trai could decide to reprice spectrum in these circles, perhaps at a lower price. Second, the 2G base price is the barometer on which pricing of other bands800 mhz CDMA and 900 mhz for refarmingis based. So resetting the base price for 2G auctions could be another possibility but it is as yet not clear if this would mean a re-auction of the allotted spectrum also. Bharat Bhargava, telecom partner at Ernst & Young, said the dismal performance of 2G auctions was no surprise and that auctions have gone along expected lines.

Reserve price was too high, it was linked to the 3G prices of 2010 but 3G and the current 2G auctions have very little in common, Bhargava said. Rajan Mathews of COAI welcomed the governments move to make a fresh reference to Trai, saying this would give credence to future spectrum allocation. Even Telecom Minister Kapil Sibal suggested that there was danger in linking 2010 prices to the 2G auctions of 2012, saying his ministry went entirely by what sector regulator Trai had recommended as far as spectrum pricing was concerned. Had we gone by the Trai recommendations made earlier (when reserve price was suggested at Rs 18,000 crore), we would have had no bidders at all, the minister said. So did Sibal want the auctions to flop, so that he could retain his zero loss theory? The Trais initial pricing recommendations were made when JS Sarma was heading the body and the recommendations on lowering the reserve price from Rs 18,000 crore to Rs 14,000 crore were made by Sarmas successor Rahul Khullar? So is it safe to assume that now, when DoT will refer spectrum pricing back to Khullar, many telecom circles will become more affordable? Also, there is every possibility that spectrum in 800 and 900 mhz bands also becomes cheaper. But the industry, as of now, is keeping its fingers crossed.

Copyright 2012 Firstpost

Spectrum stealing and more

Copyright 2012 Firstpost

spectrum stealing easy

The fine art of stealing spectrum was perfected during the NDA years when three ministers grappled with policy issues
Aditi Roy Ghatak and Paranjoy Guha Thakurta, Jun 4, 2012

2G scam: How the NDA made

t would be simplistic to assume that that the 2G spectrum scam happened only with Andimuthu Raja. Spectrum has been gifted away or stolen ever since the policy of allowing private players was unfolded in 1994. In this fifth and final part of our series on The Fine Art of Stealing Spectrum (read the earlier parts here, here, here, and here) we document what happened during the NDA regime and how norms were thrown to the winds under ministers Ram Vilas Paswan, Pramod Mahajan and Arun Shourie. *******************

The report of the Comptroller & Auditor General (CAG) of India on the telecom sector for the year 2000 had confirmed a loss to the exchequer on account of the migration policy from licence fees to revenue-sharing but did not quantify the amount. The Department of Telecommunications (DoT), however, told the Joint Parliamentary Committee (JPC) headed by Congress MP PC Chacko that the exchequer lost in excess of Rs 43,523.92 crore on account of the NDA governments 1999 migration policy from a licensing system to a revenue-sharing one. Still, in the proceedings of the JPC, there has not been much talk of how spectrum has been
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stolen for the better part of the last 18 years, even as the doubling of allocated spectrum had to be legitimized. The amendment to the licensing agreement of 2001 quietly slipped in the following sentence: charges covering royalty payment for the use of cellular spectrum up to 4.4 Mhz + 4.4 Mhz would be payable as per the WPCs (or the Wireless Planning & Coordination wing of the DoTs) prescriptions. Nowhere had it been admitted that the licensees had already received double the amount they should have; the amendment was sinister in that it seemed to pass off an act of illegality as an accepted position. Ram Vilas Paswan was Telecom Minister till 1 September 2001, handing over charge to Pramod Mahajan the next day. The amendment in the licensing agreement took place in September 2001. The constant factor was Shyamal Ghosh, who served as Telecom Secretary from 7 February 2000 to 3 May 2002. Responding to a question asked during a meeting of the JPC, Ghosh reportedly said that it was a practice to allocate additional spectrum since 1996 and that the DoT had decided that additional spectrum up to 6.2 Mhz (Mhz) could be given based on justification. What exactly did Ghosh mean? It was during Paswans tenure as Telecom Minister (13 October 1999 to 1 September 2001) with Ghosh serving as Secretary that the nowinfamous First-Come-First-Served (FCFS) principle of allotting spectrum was initiated for the first time. Truth be told, the then minister and secretary went by the book in terms of unrolling the policy: the policy had been approved by DoTs then legal adviser, its member, finance, the Telecom Commission (supposedly the highest policy-making body in the DoT), not to mention the Group of Ministers and the Union Cabinet.? Even if there was no loss to the exchequer reported at that time on account of the FCFS policy, the spectrum giveaways continued. More importantly, one of Indias most influential corporate groups had entered the telecom sector in a big way. Reliance Infocomm was allowed to offer full nationwide mobility instead of limited mobility, causing many eyebrows to go up.

A lot had happened till August 2011, when Paswan was Telecom Minister. Fresh guidelines for basic service licences (BSL) were issued, as recommended by the Telecom Regulatory Authority of India (TRAI) on 25 January 2001, with licensing of basic telephone service opened on a continuous basis, on receipt of application and subject to fulfilment of eligibility conditions. The licensees were to be allocated spectrum for wireless access system in local area on a FCFS basis and 25 new licences were issued till 2003. No upfront fee was charged for the spectrum and the annual licence fee and spectrum charges were to be payable separately at a prescribed percentage of adjusted revenue (AGR), though those using CDMA (code division multiple access) technology were given spectrum up to a maximum of 5 Mhz with their licences. The Justice Shivraj V. Patil committee report, covering irregularities in procedures followed by DoT between 2001 and 2009, talks at length about how the principle of FCFS was vitiated. In any event, there was little rationale for the FCFS principle when the licence itself would be accompanied or bundled with spectrum. There may have been a case for FCFS for basic fixed services that needed connectivity in the local loop, but certainly none for full mobility. There was a veritable serpentine queue for licences: the policy was announced on 25 January 2001, and applicants were seen waiting with bank drafts in hand at 4 am in the morning of 29 January 2001, a Monday, the day the applications would be accepted for fixed wireless services almost reminiscent of what was to come seven years later in 10 January 2008, when A. Raja was Telecom Minister. The era of FCFS had arrived, subject, of course, to other conditions being fulfilled. More than a decade after the event, PC Chacko, heading the current JPC on the 2G telecom scam, talking to journalists after MPs had grilled former Telecom Secretary Anil Kumar (1998-2000), said that Cabinet approval for the move came despite dissenting notes on the policy from the outgoing Communications Minister Jagmohan and the then Finance Minister Yashwant Sinha. For the first time, in 2001, DoT offered an initial
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start-up spectrum of 6.2 Mhz through a process of auction, which was issued to the fourth cellular operator without additional upfront charges though the auction was held for 4.4 Mhz of start-up spectrum. The beneficiaries were Bharti, Vodafone, Idea and Reliance Internet (see box). The minister was Paswan. The Justice Shivraj Committee report says: On 12.11.2001, DoT, VAS (value added services) Cell, with the approval of the minister, issued an order that 72 new cellular licensees may be assigned 4.4 + 4.4 Mhz in 1,800 Mhz band straightaway for the complete service area under the licence. It further provided that while allotting the spectrum of 4.4Mhz + 4.4 Mhz, the operators may be given an option to seek allotment of additional 1.8+1.8 Mhz in the beginning itself, subject to payment of additional one percent of revenue as licence fee. This was done without there being consideration by Telecom Commission or input from (the) WPC (Wireless Planning & Coordination) wing (of the DoT). Even there was no recommendation from Trai in this regard. There was a lot of other activity as well. Based on Trais recommendations and with the approval of the government, the DoT issued 17 new licences to private companies as fourth cellular operators in September and October 2001, one in each of the four metros and in 13 telecom circles. These licences were awarded on the basis of bidding for upfront entry fee. In 2001, the government also wanted to bring in a fourth operator in each circle. An upfront fee would be charged based on a three-stage financial bidding process from technically qualified bidders in the four metros and the 13 telecom circles (with no bids invited for Assam, the North East or Jammu & Kashmir). Besides, there would be a revenue-sharing component in the annual licence fee and a spectrum usage charge for the entire 20-year licence period. The licence would be technology neutral. The fourth operators were allotted spectrum in the 1,800 Mhz band. But there were several significant changes made in the rules of allotment. As one has noted earlier, the cumulative maximum criterion for holding spectrum had been breached. The government said in the amend-

ment to the licence agreement in September 2001 that 4.4 Mhz + 4.4 Mhz would be permitted and that, based on usage, justification and availability, additional spectrum of up to 1.8 Mhz + 1.8 Mhz would be considered, making a total of 6.2 Mhz + 6.2 Mhz, on case by case basis, on payment of additional licence fee. The bandwidth up to a maximum (4.4 Mhz and 6.2 Mhz) as the case may be, would be allocated based on the technology requirements. Besides, spectrum charges would be levied at the rate of two percent of the adjusted gross revenue (AGR) for cellular spectrum up to 4.4 Mhz (paired). For the first time the government used the term paired, neatly covering up what it had done earlier. The government also talked of additional bandwidth attracting additional fees as revenue share. Typically, it would be a one percent additional revenue share if bandwidth up to 6.2 Mhz was allotted in place of 4.4 Mhz. Then came the regime of Pramod Mahajan with Ghosh continuing as Secretary, DoT, taking certain decisions seemingly in haste though Ghosh himself claimed before the JPC that these decisions were taken after many rounds of discussions. On the basis of the available documents, it would appear that on 10 January 2002, the Telecom Secretary put up a note to Mahajan. It said that the MoC & IT had desired that we should examine the question of giving additional frequency to the cellular operators, particularly those facing problems in Delhi and Mumbai. The note went on to say that the question of optimal utilisation of frequency had been under the ministrys consideration for a while and that the Telecom Engineering Centre (TEC) had been asked to review the position. The report indicated that there was no immediate need for additional spectrum if the allocated spectrum was optimally utilised with better network configuration by decreasing the cell size and decreasing the distance between these cell sites to about half a kilometre. In fact, data available with respect to cellular services being provided in Beijing and Shanghai indicated that, with proper planning, it was possible to sustain even a larger subscriber base with the existing allocation of spectrum.
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Ghoshs note to Mahajan, however, said that if the growth rate of subscribers was to be sustained, there would be need for allocations of additional spectrum frequencies. It was also suggested that for frequency allotment beyond 6.2 Mhz, it might be better to impose an additional allocation fee rather than increasing the revenue share. The benchmark for the additional fee could be the entry fee in respect of the fourth cellular operator for Delhi and Mumbai, pro-rated for the spectrum allotted. It said that the details were being finalised. Essentially, the report indicated that there was no need to rush through the spectrum allocation process and recommended an allocation fee for additional frequency spectrum. How did Mahajan and Ghosh respond (See document 5)? Keep in mind that there was no provision in the initial contracts even to consider giving spectrum beyond the contracted 4.4 Mhz. On 31 January 2002, Mahajan convened a meeting to discuss a revised proposal for allocation of additional spectrum beyond 6.2 Mhz in the 900 Mhz band to existing cellular operators. It said that there was need to allocate additional spectrum in Mumbai and Delhi metro service areas where there was congestion and a drop in the quality of service reported by the cellular operators. The meeting considered allocation of additional spectrum beyond 6.2 Mhz and up to 8.0 Mhz to cellular operators without any upfront charge and with an increased AGR, by one percent (from three per cent for 6.2 Mhz to four percent for up to 8 Mhz). The DoT does not admit that it had already allotted 8.8 Mhz way back in 1996. It does not even say that it had sanction only to offer a cumulative maximum of 4.4 Mhz and 4.5 Mhz in 1994-95. Reuters Ghosh then further revised the note in his own hand saying that additional spectrum up to 10 Mhz may be given without any upfront charge. It was also decided that spectrum from 8.0 Mhz to 10.00 Mhz would be allotted without any further increase in revenue share. The absentee signatories to the note/proposal are of interest: the Wireless Advisor to the DoT was retiring that day, the Member (Production) and the

Member (Finance) was out and the only ones present were Minister Mahajan and Secretary Ghosh. The more important question that needs to be examined was since there was so much talk of opening up the telecom sector to more people, why was there this unseemly hurry to allocate more spectrum to the same set of players. What was the tearing rush to give away spectrum on the basis of a decision taken on a day when certain key officers were unavailable, violating the governments own recommendations and against the Telecom Secretarys own understanding of the issue that he had placed in writing on 10 January 2002, on both issues of allocation of additional spectrum and quantum of the allocation fee? What was the urgency that made the two throw caution to the winds and not even take a signed approval of all absentees but be satisfied with a verbal agreement? What was the resultant loss and who were the beneficiaries of the liberal terms? These questions are being examined by the JPC and it is almost certain that the role played by Mahajan and Ghosh will be commented on, as and when the committees report is finalised. The urgency was probably occasioned by the knowledge that the report of the Telecommunication Engineering Centre (TEC) on the topic would become available on 2 February that year and that the report could thwart the intent of the minister. The report, signed by the senior Deputy Director General, TEC, said: While some congestion was noted due to radio resource, the other main reasons of congestion and quality of service are insufficient cell sites, large intersite distances even in congested areas, lack of optimal RF (radio frequency) planning, insufficient interconnection links, etc. Yet another note on Cellular radio frequency spectrum for cellular Service Providers, drafted on 7 February 2002 makes a similar reference to some congestion, while talking of the WPCs decision to release spectrum on the basis of the Ministers approval. This additional spectrum was made available with no auction, no additional fee and this time with the stamp of official authority. What is the bottomline? The initial operators (the first to the fourth) have been allotted adCopyright 2012 Firstpost

ditional spectrum of about 150 Mhz beyond 4.4 Mhz and up to 6.2 Mhz without any upfront charge. What the value of 150 Mhz would be today is a question that is waiting for an answer. Essentially what happened in 2002 was that Pramod Mahajan gave away spectrum beyond 6.2 Mhz to operators without any upfront charge, based on subscriber base, against the recommendation of the TEC and the then secretary, only on the request of the operators, which resulted in about 90 Mhz of spectrum being allotted to these operators beyond 6.2 Mhz, without any upfront charges. There were more changes in the offing. In September 2003, the NDA government set up a Group of Ministers (GoM) for telecom under the chairmanship of the then Finance Minister Jaswant Singh to chart out a course towards a universal licensing regime based on the regulators recommendations. The proposals were cleared by October 2003, approving yet another migration of basic and cellular licenses to a unified licensing regime and fresh guidelines were issued by DoT in November 2003 because all future licences would be issued as unified access service (UAS) licences and that the entry fee for new UAS licenses would be equal to the entry fee for fourth cellular operators. By November 2003, Arun Shourie had become Telecom Minister. In a manner of speaking, Shourie freed the operators from the oppression of the bureaucracy no one had to run to Sanchar Bhavan for licences. Earlier, there was need for a clearance for every kind of licence and there were so many of them. Unifying the licensing regime was a good idea but one question remained: what was the need to do so with a bureaucracy already so pliable and the players so large? The biggest beneficiary of Shouries tenure as Telecom Minister and the change in policy allowing operators providing limited mobility to full mobility was, of course, the then undivided Reliance group. The UAS licence too would be issued on a FCFS basis and spectrum would be allotted, subject to availability. Reliance, which had entered the fray in 2001 under Paswans FCFS scheme, now got permission to provide mobile phone services with full mobility, thanks to DoT under Shou-

ries stewardship. The policy provided for an initial allocation of a cumulative maximum up to 4.4 Mhz (paired) for TDMA (time division multiple access)-based systems, or 2.5 Mhz (paired) for CDMA (code division multiple access)- based systems, subject to availability and specified that spectrum not more than 5+5 Mhz in respect of CDMA systems or 6.2+6.2Mhz in respect of TDMA systems would be allocated to any new UAS licensee. Besides, the spectrum would be allocated in the 824-844 Mhz paired spectrum band with 869-889 Mhz, 890-915 Mhz paired with 935-960 Mhz and 1,710-1785 Mhz paired with 1,805-1,880 Mhz. These technical clarifications were crucial to ensure that no one secured spectrum in any band other than what had been specified. Spectrum charges on a revenue-sharing basis were to be notified separately by the WPC (Wireless Planning & Coordination) wing of the DoT from time to time. The licensor retained the right to modify or amend the procedure of allocation of spectrum, including the quantum of spectrum. The government then came up with the subscriber base criteria stating that it would allot an extra 1.8 Mhz spectrum up to 6.2 Mhz if the licensee reached a subscriber base of 500,000. Also, subject to availability, allocation of spectrum up to 10 Mhz would be considered. The subscriber-linked criteria was revised in March 2006 and the biggest beneficiaries were the big three of Indian telecom: Bharti, Vodafone and Idea. The Shivraj Patil Committee report points out endless instances of aberration from the prescribed policies of the time. Under the segment, Terms of Reference 4, it says in paragraph 20 (4.1 XX): In case of Bharti Airtel Ltd, an allotment of 2 + 2 Mhz beyond 8 + 8 Mhz of spectrum has been made for Delhi service area on 17.7.2003 though no criteria for allotment beyond 8 + 8 Mhz existed. The allotment seems to have been made in anticipation of report of the Lalwani Committee, which was approved by MoC&IT on 18.08.2003. In the absence of laid down procedure much less published/announced one, allotment of spectrum (additional) beyond 8 + 8 Mhz was improper.
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The stealth of spectrum having been papered over, things seemed to be hunky dory till the relatively recent brouhaha over spectrum allocation and valuation erupted, which prompted the DoT to seek legal opinion on a hitherto unadmitted crime as recently as January 2012. The DoT now wants to know whether a onetime spectrum charge can be levied for spectrum already allotted beyond 6.2 Mhz with retrospective effect. Even the legal opinion sought is based on a less than honest rendering of the facts of the case. The DoT does not admit that it had already allotted 8.8 Mhz way back in 1996. It does not even say that it had sanction only to offer a cumulative maximum of 4.4 Mhz and 4.5 Mhz in 1994-95. The law ministry is yet to respond. There is no gainsaying though that any opinion that it gives could well be on the basis of incorrect facts. Even so, one hopes that this time the DoT will not get away with obfuscation. The point is that much more spectrum will be on demand and much more will be given away. The question is: will it be given for free? Spectrum, one is often told, is priceless. In a world where technical phrases are invested with dif-

ferent meanings, will priceless be deemed to be free of price? Will the past giveaways be condoned or will the guilty be brought to book or at least made to pay? The moral and legal issue is meting out justice to those who colluded in giving away spectrum, a finite and scarce resource that belongs to the people of India, beyond the contracted amount for they clearly violated the law of the land. Given the ongoing trend of discourse and discussion, one can take a pessimistic view and contend that not only will those responsible for squandering away a natural resource not be punished but that they may not even be asked to pay for what they have consumed! This is unfortunately what the current debate between telecom operators and the government seems to be heading towards, despite the Telecom Commission holding that operators using 2G spectrum will have to pay up for excess spectrum held beyond 6.2 Mhz. The Mad Hatters Telecom Party continues. (End of Part V and series. Read Part I, Part II, Part III and Part IV here)

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with a flawed loss theory

The CJI said the other day that loss is fact, but gain a matter of opinion. Was he taking on the CAG with this flawed theory?
R Jagannathan, Sep 24, 2012 According to a report in The Indian Express, the CJI said: Loss is a matter of fact and profit and gain is a matter of opinion. So, by implication, the CAG is talking through his hat. The CJI expanded on his basic statement thus: Today a number of controversies on valuation are discussed, but the basic principle of valuation is that loss is a matter of fact and profit or gain is a matter of opinion. Please apply this test to the controversies going on. I do not want to discuss anything further. Loss is a matter of fact and profit and gain is a matter of opinion. So if you understand these principles, we will be able to judge. Our perceptions will become more sound and we know where the shoe pinches. Correction, Chief Justice Kapadia. If you are merely saying that the loss figures on 2G and coal blocks depend on the assumptions made by
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Why is CJI taking on CAG

he outgoing Chief Justice of India (CJI), Sarosh H Kapadia, has given the UPA government much grief, thanks to his Vodafone judgment, but on Saturday he could not but have warmed their cockles with his indirect observations on the 2G scam and judicial activism. Kapil zero-loss Sibal and Palanippan zeroloss Chidambaram will feel vindicated. Though he did not actually criticise the estimates of the Comptroller and Auditor General (CAG) who had put the presumptive loss on 2G spectrum at Rs 1,76,000 crore and the unintended gains in the coal block allocations at Rs 1,86,000 crore there is no doubt he gave the CAGs critics, which include the PM, ammunition for the same.

the CAG and are thus mere guesstimates, we are with you. But to claim that loss is a matter of fact is also quite wrong. In accounting principles, loss is a matter of recognition, and not just fact. Unless you are in a business where revenues and costs are accounted for only on a cash basis, loss too is often a matter of opinion. As any qualified CA can tell you, companies can turn losses into profits, and profits into losses, depending on what revenues or costs they choose to recognise. You can turn a loss into a profit by changing the depreciation method from written down value (WDV) method to straightline, or by valuing inventories and sales differently. A construction company can recognise revenues one quarter earlier or one quarter later, depending on how much of a project is complete, rather than when sales actually materialise. This impacts the loss figure, if any. In the case of banks, a bad loan can be made good by rescheduling a loan and thus a loss can be turned into a profit. Conversely, by providing for a potential loss in advance, a profit can be turned into a loss if a bank or company wants to do so. Many small-time promoters, in fact, do this to influence market prices and indulge in insider trading. Smart banks like HDFC, for example, also tweak their income, cost and bad loan recognition norms to smoothen out results from quarter to quarter. In short, loss is as much a matter of opinion as profit or gain. The CJI could consider this fact to modify his views. But since the purpose of his observations must have been to contradict the CAG on his 2G and coal block loss figures, let us also deal with them again. Firstpost would readily agree that the CAGs sensational loss figures may have grabbed media attention like never before and focused attention on the losses per se rather than the real problem: lack of transparency in decisionmaking and possible attempts to help out crony capitalists. However, can the CJI really claim that sell-

ing 2G spectrum at prices lower than what the market can bear is not a loss to the exchequer? Its not about the quantum of the loss, but that there was a loss is certain. Similarly, how can one say that there was no loss in handing over coal mines for free to 142 businessmen without a transparent policy? The CJI is surely right in emphasising that the courts (and the CAG) should not transgress into the policy-making area, but surely it is the CAGs duty to point out what the costs of a policy were? Does it make sense for a government any government to decide to sell spectrum or allot coal blocks without quantifying the losses and gains? It is possible to justify free coal block allotments of Rs 1,86,000 crore (as the CAG claims) if the government can equally quantify social or other benefits of a similar amount. It is all right to sell spectrum at 2001 prices, or even give it away free, if there are larger social benefits to be had (teledensity), but governments that want to do this must find a way to quantify the losses and gains, however, presumptive they may seem. In the absence of this kind of costs-and-benefits calculations, on what legitimate basis can any government decide to go for an auction or a first-come-first-served scheme when it does not know why it is doing so? CJI Kapadia is surely right to ask everyone to take the loss or gain figures with a pinch of salt, but no government should draw comfort from this. Governments have no right to take policy decisions without trying to at least estimate who will gain or lose. The figures may be wrong or wildly out of whack in hindsight, but they will at least have the legitimacy of a well-thought-out line of reasoning. The2G and coal block allocations are scams precisely because the government did not do the calculations that the CAG did post facto. The CJI would have done well to emphasise this aspect, rather than just suggest that the loss figures are not fact. Half-truths are of no use to anybody.
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Raja gives HC 10 major reasons

to quash his 2G trial

Andimuthu Rajas petition to squash his trial in the 2G scam makes strong arguments - but leaves two questions hanging
Raman Kirpal, Jul 10, 2012

rust Andimuthu Raja to keep pulling rabbits out of his hat. The prime accused in the 2G scandal, whose trial in the Special CBI Court of Judge OP Saini in Patiala House is half-way through, has now moved the Delhi High Court claiming his trial is unconstitutional and illegal.

to Z, and going even further from AA to RR, why he is a wronged man. Raja was a public servant at the time the UAS (unified access service) licences were issued. The Learned Special Judge has specifically held that the petitioner (A Raja) was discharging statutory functions while allocating spectrum. Having so held, he has erred in failing to appreciate that no prosecution could be commenced without obtaining sanction under s. 197 CrPC Thus, the requirements of section 197 are clearly fulfilled, and even cognisance could not have been taken in the absence of sanction. At any rate, the proceedings cannot continue in the absence of sanction. This is the technical and tactical defence. Raja then goes on to explain how absurd it is when the central government is maintaining that the loss on spectrum sales at 2001 prices was zero and yet he and 17 others were named as accused in one conspiracy! What charges does the court hold against Raja? The allegations pertain to non-revision of entry fee/non-auction of spectrum, fixation of cutoff date, alleged violation of the First-Come-FirstServe Policy, allocation of spectrum, and receipt of investment/loan by Kalaignar TV Pvt Ltd. A Raja moves 10 major arguments in his defence: Raja says he allotted and priced 2G spectrum fully in conformity with the consistent policy of the Department of Telecom and the government. Successive governments have chosen to allocate telecom licences and spectrum on a basis other than revenue maximisation. During 2003-2007, a total of 51 licences were issued by
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In his petition, Raja says the charges framed by the Saini court against him are unfounded and untrue and hence they must be quashed. Of about 122 witnesses, the Central Bureau of Investigation (CBI) has already paraded more than half of them. These witnesses were examined and cross-examined. The CBI is expected to finish prosecution arguments by December 2012. Raja, in his petition, says that he wants the trial stopped because no court can prosecute him without obtaining sanction under Section 197 of Criminal Procedure Code (CrPC). The petition rolls out Rajas version of the truth, which, he says, was not appreciated by Judge Saini. He listed out reasons, numbered from A

DoT. These were issued on the same terms and conditions as those issued by the DoT under the petitioner (Raja) in 2008. Raja has merely followed the decisions of his predecessors in this regard. If the petitioner has to be charged with cheating, then each and every communications minister since 2003 also must face the same charge. In fact, it is to be noted that these were not decisions of the MoCIT (minister of communications and IT) alone but were backed by successive cabinets. Section 420, under which he has been charged, deals with wrongful loss being caused to a party on the basis of a misrepresentation being made by the accused person. The central government, who is the alleged victim of the cheating, has consistently maintain in public and in parliament that the loss caused by the so-called 2G scam is nil. If this is so, how can section 420 be imposed on him? Judge Saini has failed to appreciate that the public gained due to Rajas move. In March 2007, rural teledensity was about 6 percent and total teledensity was about 18 percent. And Raja brought up rural teledensity to 28.46 percent and total teledensity to 61 percent. Not only this, it skipped the attention of Judge Saini that the government has collected about Rs 77,938 crore under the revenue share regime, in the telecom sector. Raja quotes present Communications Minister Kapil Sibal as saying: Government policy over the years, while abandoning revenue maximisation, has yielded benefitsThe average tariff came down from almost Rs 17 per minute in 1999 to about Rs 3 per minute in 2004 and by March 2010 this became as low as 57 paise per minute while today it has reached a level of 30 paise per minute. This is a direct and tangible benefit. The benefit of this reduction in tariff is estimated at over Rs 1,50,000 crore per annum to consumers. Thus, the truth of the matter relating to spectrum pricing is that loss to the government is nil, and the gain to the public is to the tune of Rs 1,50,000 crore per year. It is indeed unfortunate that having implemented such a policy, the petitioner (Raja) is being accused of having cheated the exchequer. Raja also claims he tried to break the cartel in the telecom sector. Nobody objected to the pricing issue till the cartel continued to get benefits of the telecom licences. The moment the cartel was broken by

issuing licences to new entrants, all these objections have been taken. Judge Saini doesnt appreciate that telecom operations require huge investments and thus companies like Swan and Unitech bring in strategic foreign partners to bring in money. If Swan and Unitech are to be charged because of the equity infusion into their companies, then the prosecution (CBI) has to explain why it has not charged Tata Teleservices Ltd, Sistema Shyam Teleservices, and S Tel, which also had infusion of foreign equity of much greater amounts. The prosecution (CBI) theory of one conspiracy among all accused is ex-facie absurd. Swan had already applied for a licence in March 2007, before Raja became the telecom minster. It had no reason to conspire with him. Plus, Unitech and Swan were direct rivals. They would never conspire with each other. Unitech never got spectrum in Delhi circle and Swan did not get it in some other districts. There is no evidence at all to suggest a common conspiracy between Swan and Unitech. Judge Saini should not have started the trial in the 2G case, when the investigation is still pending. As it turned out, subsequent events in this case have had a material bearing on the case against the Petitioner (Raja) A flurry of applications for telecom licences led DoT to propose that there should be a cutoff date and Raja approved the proposal. A total of 575 applications were received till the cutoff date. Raja took the law ministrys opinion and he had also apprised Prime Minister Manmohan Singh about his decision. If the countrys Prime Minister was aware of what Raja was doing, the trial against him will amount to an abuse of the process of the court and thus the high court should intervene and set aside the trial and charges against Raja. The high court, as the law demands, has issued a notice to the CBI for its reply. Senior CBI officials investigating the 2G scam say they see two loopholes in Rajas arguments. One, did he not manipulate the cutoff date? And second, did he not misguide the PM and the entire nation by forging the law ministrys advice? According to the CBI, these two questions make are key to the edifice of conspiracy that Raja laid.
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