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Journalism of Courage
How did the Comptroller and Auditor General arrive at this figure?
One of the bidders,S Tel,offered the government Rs 13,752 crore for 6.2 MHz of spectrum as compare with the Rs 1,651 crore for 4.4 MHz of spectrum that it was charging. Based on this,CAG said the government could have got Rs 65,725 core as compared with the Rs 9,013 crore it did.
But is it right to compare 2G and 3G spectrum? Raja says it is like comparing PDS rice with basmati.
The price of spectrum,as for anything,depends upon demand and supply. Since there was a shortage of spectrum,firms would pay a higher prices. More important,it is the government that decides whether spectrum is 2G or 3G. If it says the 1,800 MHz spectrum given to new telcos can be used for 3G services,this will become 3G,so theres really nothing like 2G spectrum or 3G spectrum.
Indeed,spectrum in 1,800 Mhz band is better than the 2,100 MHz spectrum given in the 3G auction as you need to set up lesser towers to meet subscriber demand the lower the frequency,the better the spectrum.The Trais recommendations of May 2010 prices 2G spectrum at 1.5 times more than the auctioned price of 3G spectrum if the spectrum is in the 800 MHz band.
What is Rajas defence?
Raja maintains he went by the Trai recommendation of allowing free entry of firms and of and not auctioning 2G spectrum. As for charging the 2001 price for the spectrum,he says Trai did not ask for revising it. As for Swan and Unitech selling part of their equity to Etisalat and Telenor at prices vastly higher than what they paid the government,the minister says this was not a sale of the existing equity,it was new equity that was required to roll out network and services and so it was incorrect to see this as the two telcos getting a windfall. Curiously,he then barred promoters of new licensee firms from doing even this for three years.
Does his defence hold water?
Yes and No. It is a fact that the Trai recommendations did not ask for auctioning. But it is also true that when the media criticised the Trai,its then chief Nripendra Misra clarified his position and said the 2001 price was unacceptable at this point,no licences had been issued. Misra also said he had recommended that the existing policy be continued with,and the existing policy was that auctions were to be conducted. Misra also wrote to Raja saying his recommendations had many in-built checks to ensure firms didn8217;t cash out and that Raja was implementing them selectively.
Raja also tweaked the first come first served policy to favour some chosen firms. The CAG has pointed out that 85 of the 122 licences were issued to firms who did not meet the required criterion on net worth and issues like that. In the case of Swan,the CAG says Reliance Telecom held a 10.71 per cent stake in it and this disqualified it under the 10 per cent cap rule the company was allowed to submit a revised equity holding pattern 9 months later,but the effective date of when it was in the queue for spectrum was taken as its original application date. Similarly,in the case of Loop Telecom,while it was apparent the Ruias owned more than 10 per cent of it while holding a stake in Vodafone,the DoT did not have this investigated.
Is there any other way these companies were benefited?
A crucial recommendation of Trai with regard to merger and acquisitions for new licencees was tweaked by the DoT,which led these companies sell stakes. Trai had said firms should not be allowed to Mamp;A till they achieved their roll out obligations. Companies have to roll out networks covering 10 per cent of the circle by year one and 50 per cent by year three. However,DoT changed it and while it barred mergers for three years,it allowed them to sell stakes up to 74 per cent before that. This helped Swan and Unitech to sell stakes even before they set up a single tower.
How did Raja tweak the FCFS policy ?
As per the DoTs guideline,firms are given 15 days to complete all formalities after they get a Letter of Intent furnishing bank guarantees of Rs 1,651 crore for a pan-India licence and a performance bank guarantee of Rs 800 crore. The date of payment does not decide your position in the first come first served FCFS queue. Raja changed this and said the date of the payment would determine the position in the queue. So firms who knew when the window would open had their bank guarantees ready.
Why is January 10,2008 a notorious date in DoT8217;s history?
On January 10,2008,DoT came out with a press release stating its intent to provide LoIs to all the applicants who had applied till the cut-off date of September 25,2007. The press release stated,DoT has been implementing a policy of FCFS for grant of UAS licences under which initially an application,which is received first will be processed first and thereafter if found eligible will be granted LoI. Interestingly a fresh clause was added to this provision: and then who so ever complies with the conditions of LoI first will be granted UAS licence.
Later,on the same day the DoT issued another press release,which was quite unprecedented. It asked all applicants to authorise one representative to collect LoIs. By then it was clear by an earlier release that the 15-day time given to submit the money has lost relevance. The one who paid first would be treated first. The day saw a melee in DoT finally enabling Swan to make the payment first followed by Unitech. Thus,from number 4 and number 8 in the list of filling their application for licences they became number one and two in the line for getting spectrum.
