Reality Check India

Incredible India – Rs 1,00,000 Crore turned private

Posted in Uncategorized by realitycheck on December 22, 2008

DoCoMo picked up an 26% chunk of Tata Teleservices for USD 2.7 Bn.  Another multi billion dollar company created with cheap spectrum.

Article in a foreign magazine Comm.Ae –

Valuations in India continue to remain fluid, in particular with respect to greenfield opportunities. For example, the GSM licences that the likes of Telenor and Etisalat have participated in were offered at a fraction of the price that they were deemed to have been worth. So much so that earlier this year India’s regulator was accused by the finance ministry of selling 2G spectrum in January at onequarter of the market value, thereby losing approximately INR250 billion (US$5.7 billion) in income in the process.

The Department of Telecommunications (DoT) awarded the pan-India 2G spectrum in January to new licencees at what was alleged to be a price equivalent to the price of the spectrum in 2001amounting to INR16.51 billion.

The finance ministry had earlier opposed the move to sell 2G spectrum below market rates, saying the additional INR250 billion would have relieved as much as 60 per cent of India’s revenue deficit in the 2008 financial year.

Source : Comm.Ae (emphasis added)

Actually, the loss is INR 600 billion at the lower end of the estimate. Anyway, we get the point.

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Telecommunications Employees Progressive Union comes out with a booklet in support of the scam called “Spectrum : Myth and Reality”. The Hindu prominently features this item. No mention of what the reality is and what the myth is.

In fact, the union launched a counter attack saying that there existed a strong cartel of existing operators before Raja took over as it was always maintained that there was no spectrum to bring in new players.

“Not only a cartel was maintained in telecom sector, there was a surreptitious play have also been done all along by claiming that there was no spectrum for expansion. Could you imagine the real loss incurred financially and technically to this country by this coffer play?” the booklet said.

Source : Hindu

Firstly. Cartel or no cartel. That is not the question. Did the government lose Rs 100K Crores or not ? There are ways to break the cartel without causing this huge revenue loss.

The second point is not worth responding to. What they are saying is this, yes we caused revenue loss, but why only pick on the spectrum allocation. What about the “cartel” causing revenue loss ? If they can do XYZ and escape why cant we do ABC and escape ?

At this point everyone agrees the government and the poor people of India lost BIG. There are only alibis being offered. It is time the PM responded to this issue.

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It is not too late now. The Telenor, the DOCOMO, and the Etisalat deals have to be scrapped. The cash returned to their respective owners. These companies should either roll out on their own or surrender their licenses so they can be sold for their actual value. If they are too small to offer services on their own, they should not even be allowed to play this game.

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The PM and former FM continue to maintain absolute silence on this. They are waiting for this news to blow away and they will be rewarded with this outcome in due time. Incredible India.

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There is some talk in the Acorn about the RBI Governor and robust institutions. We agree, but we also think the train has left the station. Everyone, including the RBI governor has to look the other way when some things happen.

Was the RBI Governors’ advice ignored ?

It is obvious beyound any reasonable dout that Telecom Minister Raja ignored everybody’s advice on the subject. It is also reported that Raja went against the advice of the RBI Governor Subbarao. He had written to Raja to “kindly review the matter and revert to us as early as possible with responses to the above issues. Meanwhile all further action to implement the above licenses may please be stayed.”

Raja also repeatedly ignored the advice of TRAI. In 2007, TRAI had had recommended, “In today’s dynamism and unprecedented growth of the telecom sector, the entry fee determined then (2001) is also not the realistic price for obtaining a license. Perhaps it needs to be reassessed through a market mechanism.” TRAI Chairman has stated that “TRAI has never recommended first come first serve for award of new licenses.” Also, TRAI had suggested that permission for mergers and acquisitions should not be entertained unless “rollout obligation is met” which also makes a lot of sense.

Blog Source : Customer and Management Blog

More blog coverage

The 100000 Cr Scam – Biggest in history of India

Our government serving us

Mother of all scams (including Amar Singh)

Scam or inefficiency

Booming companies of politician

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5 Responses

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  1. AB said, on December 22, 2008 at 7:56 am

    Govt seems to be looking for a scapegoat to bury this scam. Check this:

    http://dailypioneer.com/145259/Govt-hunts-for-a-scapegoat.html

    And more on raja here:

    http://www.dailypioneer.com/143633/Zero-to-Rs-755-crore-in-1-year!.html

  2. AB said, on December 22, 2008 at 7:57 am

    Second link may not work. You may need to copy-poaste it in the address-bar.

  3. Pimp said, on December 30, 2008 at 9:02 am

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  4. […] 20 2008 : Incredible India – Rs 1,00,000 Cr turns private At this point everyone agrees the government and the poor people of India lost BIG. There are only […]


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