Reality Check India

Scam robs poor street children

Posted in Uncategorized by realitycheck on December 14, 2008

Sorry for the attention grabbing title. 

Maybe, the problem is that this scam has not been explained in the media in simple language.  Lets try it.

Q 1 : What is the 2G spectrum ?  It is a range of radio frequencies that can be used for a variety of mobile services including cell phones.

Q 2 : Why are you making this big noise about it ? Not everything is perfect in India.  We can always make sure that next time we avoid these mistakes.  Sorry, there is no “neksht time”.  The spectrum is a really scarce resource. Think about it as selling exclusive rights to using alphabets, there are only 26 of them.

Q 3 :What about the interconnections of TRAI, DOT, COAI ?  What about this Tehelka article claiming the TRAI boss is also responsible ? Do not fall for the trap and start analyzing the inter department politics. You will get confused and lose interest. The point is all these departments represent the government. All of them are responsible. Keep focus on the scam.

The scam itself

1. Announce a first-come-first-served basis for selecting the winners among those who have something called a Letter of Intent (roughly like a challan). A mad scramble happens outside the Sanchar Bhavan office much like what you might see in Virudhunagar bus stand during Pongal.

2. One of the big winners of the scramble is Swan Telecom. It wins the so called Universal license (UASL) in 13 circles including Delhi. This is because their peon was the fastest to get to the counter at Sanchar Bhawan and get the paper stamped. Datacom is another big winner, getting 19 circles. Unitech, the realty firm wins 13 circles.

3.  In total – the Indian government (UPA led by the Congress Party) sold 120 licenses to 9 winning applicants  for around Rs 9,000 Cr (around USD 1.9B).  This is the grand total the poor children of this country got as a result of selling a national resource.

4. The main question, rather the only question is : Is Rs 9,000 Cr the correct valuation of this ? Whether we had an auction or internet-voting or first-come-first-served or entrance exam is irrelevant.  The only way to nail this is to see what the market pays for it. Luckily for us the market spoke quickly and the winners were too greedy to wait for the dust to settle. Read on.

5. Swan paid Rs 1,537 Crores for its licenses. Remember this is a company whose website we cannot locate.  In just a couple of months, this company sells 49% of itself to UAE telecom giant Etisalat for USD $1.2 Billion. Swan has no towers, no equipment, no operations, no subscribers. Just a shell with an approval. This is good because we can clearly put a valuation on the spectrum because the company is worth nothing without it. The value that Etisalat placed on the Swan Assets + Swan Spectrum  = USD $2.4 Billion or Rs 12,000 Cr.

6. Unitech paid Rs 1,651 Crores for its spectrum in 13 circles. With a plain face, within just a couple of months,  they sell 60% stake to Telenor for Rs 6,120 Cr.  Like Swan, Unitech Wireless have no assets to value other than the approval papers they hold. So the value of the spectrum that Telenor paid was Rs 6,120 Cr / 0.6 = Rs 10,200 Crore.

7. The total money made available to the hungry child at the traffic light was Rs 9,000 Cr. Just two companies Swan and Unitech each have made more than that in just a couple of months.

8. Do the maths. This places the total value of all 120 licenses at Rs 65,000 Cr.  The government lost Rs 65,000 – Rs 9,000 = Rs 56,000 Cr straight!

9. Two overnight dollar billionaires were created with money that belongs to the dalits and the oppressed and the poor of this country.

10. The funny thing about this is : if Reliance or Tata or Infosys had won the licenses instead of Swan and Unitech and then turned around and sold it to say AT&T, no one would have batted an eyelid. It would be much harder to value.

11. Another funny thing is the focus on A. Raja. He has kept the PM in the loop. This has been sanctioned at the PM level. Manmohan Singh and Dream Budgeteer P. Chidambaram must answer questions instead of raising new ones.

12.  The BJP is silent as expected. Thanks are due to the left once again for forcing a debate on this issue.

14.  This is what the government has to say in court when asked why it robbed hungry street children.

“If the spectrum was to be auctioned to the highest bidder for an upfront payment, such a bidder would pass on the cost to the customer or would go bankrupt. The cost of running the services can become so high that nobody would be really interested in applying for licence,” the government said.

Source : The Hindu

Yes, but Telenor and Etisalat have paid market price for it. Wont they pass it on to the customers ? The question is why did the money go to middlemen instead of the government which I am sure has ambitious programmes for hungry street children.


Crony capitalism at its very best.

Next : The government lame defence


I urge Indians who are openly plotting Star Wars style ‘surgical strikes’ and of American style ‘shock and awe’ to first hold on to their own knickers.

9 Responses

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  1. reason said, on December 14, 2008 at 2:22 pm

    dont read much into the left’s noise on this. they make this noise because they are aligned with amma in TN, and amma is a pretty tough ally to keep in good humor.

    TN CM made a specific comment that the bjp government, when shourie was the minister, followed the same first-come policy. If BJP refuted or reacted to that, i do not find it.

  2. rc said, on December 14, 2008 at 5:39 pm

    The left could have kept quiet like the others who watch the 55,000 Cr grand theft.

    Nilotpal Basu has an article on India Interacts called “The spectacular spectrum scam”

    This was before the deal was announced with JJ.

    There is no point blaming Rasa, the funny thing is senior congressmen who santioned this loot wont have a stain! PC is still Mr Dream Budget and Manmohan in still Gentle Economic Saviour.

    Notice how the desi blogosphere is going bonkers over Shiela Dixit. What happened – she is very much part of this scam, by virtue of belonging to the party who carried it out and not caring to speak. She is also very much part of the government which cheated on the social justice plank.

    If you squander your “educated middle class vote” by completely ignoring the party system. It is better you do not vote at all. Stupid is as stupid does.

    I guess if this trend continues, I might end up on the left (which BTW is not very meaningful in India).

    If they can raise a voice against wholesale daylight swindling – then more power to them.

  3. […] a comment » First, an update on the grand daddy of all scams. The Congress Party led UPA government’s underselling of a national property by […]

  4. […] talked about Swan and Unitech who become overnight dollar billionaire by reselling. Now, we also know of Tata Teleservices who sold 26% to NTT DoCoMo of Japan for 13,000 […]

  5. Chandra said, on January 10, 2009 at 8:17 pm

    Shocking. Why I have to study hard, and work hard. If I know and happen to be in front in line to get the application, I would not have to work for the rest of my life. Indian National Congress, worked hard, sacrificed a lot to get the freedom. Now the Congress, working hard to sell the freedom. 100 years a lot of change. God please bless our country.

  6. realitycheck said, on January 11, 2009 at 3:22 am

    > Why I have to study hard, and work hard

    Wait ! You think that is bad.

    Why does a soldier have to give his life leaving his wife and kids behind ? Is it because the spoils can be enjoyed by a few in peace ?

    This is why this blog does not advocate war or even talk about it as an option at the moment.

    I may be a cynical jackass, but I am smart enough to know that our war will be of dirty vintage variety. Thousands of soldiers will die in the front lines, every week. I dont think there is enough litres of righteousness among the politicians nor enough kilos of awareness among the non combatant public in this country. Not only that I am not even sure the opponent is not righteous. Remember their righteousness, the jihad may not be agreeable to us. It does not matter though as long as they believe in it.

    So what is the solution. Let us sloppily waddle on like we have done in the past. Either the public gets smart and righteousness levels are increased. Or things continue downhill, in which case we have to answer whether all this is worth salvaging at all.

  7. […] weeks. Telenor and Etisalat paid what most consider to be fair price for the spectrum (owned by the poor people of India, but social justice champions of dissent will not tell you that). Till date no one […]

  8. […] Telenor and Etisalat paid what most consider to be fair price for the spectrum (owned by the poor people of India, but social justice champions of dissent will not tell you that). Till date no one […]

  9. […] 14 2008 : Scam robs poor street children Maybe, the problem is that this scam has not been explained in the media in simple language.  […]

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