2G scam: SC quashes 122 licences

Discussion in 'Economy & Infrastructure' started by Yusuf, Feb 2, 2012.

  1. Yusuf

    Yusuf GUARDIAN Administrator

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    NEW DELHI: In a major setback for the government, the Supreme Court on Thursday quashed all 122 spectrum licences granted after January 2008.

    The apex court left it open for the trial court to decide whether home minister P Chidambaram needs to probed in the 2G scam.

    The SC said that there was no need for SIT to monitor the 2G scam probe.

    The SC verdicts came on Janata Party president Subramanian Swamy's petition seeking a CBI probe into the alleged role of home minister P Chidambaram in the spectrum scam, and on two pleas by lawyer Prashant Bhushan seeking cancellation of 2G licences and setting up of an SIT to monitor probe into the scam.

    Swamy has demanded a CBI probe into the role of Chidambaram with regard to the 2G scam. The Janata Party chief, who is the petitioner in the 2G case, has alleged that Chidambaram, then the finance minister, could have prevented jailed former telecom minister A Raja from giving away spectrum at throwaway prices to select companies, but chose not to do so.

    Swamy had won a success in the court on Tuesday when Justices Singhvi and Ganguly upheld his right to seek the prosecution of Raja for the 2G scam and indicted the PMO for delaying prosecution of the sacked telecom minister.

    The Times of India on Mobile
     
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  3. Yusuf

    Yusuf GUARDIAN Administrator

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    NEW DELHI: While the Supreme Court today came down heavily on former telecom minister A Raja, it has not found any fault on the part of Prime Minister Manmohan Singh, the then finance minister P Chidambaram or the ministry he headed.

    The judgement has strongly indicted Raja over the manner in which he manipulated the issue of licenses and ordered cancellation of the 122 2G licenses in 22 circles.

    The two-member bench of Justices G S Singhvi and Ashok Ganguly found that telecom regulator Trai's recommendations of 2007 on the policy of first-come first-serve basis was placed before the Telecom Commission in October but the four non- permanent members, including the Finance Secretary, were not even informed about the meeting.

    A week later, Raja accepted the recommendations of the Telecom Commission and approved the Trai's recommendation but did not get in touch with the ministry of finance to discuss and finalise the spectrum pricing formula.

    "However, as the Minister of C &IT (Raja) was very much concious of the fact that the secretary, finance, had objected to the allocation of 2G spectrum at the rates fixed in 2001, he did not consult the finance minister (Chidambaram) or the officers of the finance ministry," the judgement said.

    Raja sent a letter in November, 2007 to the Prime Minister saying the department of telecom has decided to continue with the existing policy. He did not bother to consider the suggestion made by the Prime Minister that in view of the inadequate availability of spectrum fairness and transparency should be maintained in its allocation.
    The Times of India on Mobile
     
  4. Yusuf

    Yusuf GUARDIAN Administrator

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    NEW DELHI: Supreme Court ordered on Thursday telecoms licences issued under a scandal-tainted 2008 sale be revoked, striking a decisive blow against corruption that plagues the country and roiling the world's second biggest cellular market.

    The ruling applies to 122 licences held by eight operators but potentially affects fewer than 5 percent of users in a fiercely competitive market crowded with more than a dozen players.

    Market leaders such as Bharti Airtel and British-based Vodafone, which last month scored a big win when the Supreme Court ruled it was not liable for $2.2 billion in tax, are poised to benefit from the ruling.

    The licences affected include those held by Unitech Wireless, a joint venture of Norway's state-backed Telenor and Indian real estate firm Unitech, which has been the most aggressive of the newer operators and had more than 36 million subscribers in the country as of December.

    "We have been unfairly treated as we simply followed the government process we were asked to," the Telenor joint venture, which operates as Uninor, said in a statement.

    "We are shocked to see that Uninor is being penalised for faults the court has found in the government process," it said.

    Telenor shares fell 3.67 percent in Oslo. Affected licence holders can operate for four months, during which regulators will come up with new market rules.

    Freed-up spectrum will be auctioned, which could bring a multi-billion dollar windfall to a deficit-strapped government.

    The ruling is an embarrassment for Prime Minister Manmohan Singh's government, which oversaw the sale of the licences at below-market prices, costing the exchequer as much as $36 billion in lost revenues and leading to political gridlock.

    The telecoms scandal is the biggest of several that have emerged during Singh's second term and triggered street protests last year.

    "It is a historic judgment. It is trying to break a corrupt nexus between business and politics," said political analyst Paranjoy Guha Thakurta, who was one of petitioners in the case.

    Two ministers, including former telecoms minister Andimuthu Raja who presided over the 2008 grant process, have resigned. Raja is in jail awaiting trial.

    While the ruling may revive investor worries about the uncertainty of doing business in Asia's third-biggest economy, it could also build confidence in the role of the judiciary and broader efforts to crack down on corruption.

    "This is one step closer to transparency in policy-making," said Kamlesh Bhatia, research director at Gartner in Mumbai.

    BIG PLAYERS BENEFIT

    India is the world's second-largest cellular market by subscribers, with 894 million at the end of December, although fierce competition means call rates are among the lowest.

    Investors and operators have long called for consolidation in the crowded industry, and Thursday's ruling stands to benefit the country's biggest operators.

    "This verdict is good news for established incumbent operators and in the short term, we are likely to see some increase in tariffs," said Benoy CS, a director at consulting firm Frost & Sullivan.

    Shares in Bharti, the world's fifth-largest carrier by subscribers, ended 6.8 percent higher while Idea gained 3 percent, reversing earlier losses. Unitech fell 7 percent.

    Carriers whose licences were ordered revoked include those of the local joint ventures of Abu Dhabi's Etisalat and Russia's Sistema, as well as Telenor.

    "For foreign investors, it is very bad news. What mistake did they do? They partnered with Indian companies, invested lots of money and followed the process of that time," said Rishi Sahai, director at consultancy Cogence Advisors.

    Affected companies are expected to fight the verdict. Sistema's India unit said it "reserves the right to protect its interests by using all available judicial remedies".

    India's big operators crave more bandwidth to accommodate surging usage in the country of 1.2 billion, so if the spectrum is auctioned it could command a premium.

    The state auditor has said the spectrum bundled with the 122 licences would be worth $22.7 billion at the price paid in the 3G auction in 2010, although 2G spectrum is likely to command a lower price.

    "Whether this auction will be opened for all operators or will be open only for the people whose licences are being cancelled -- that will determine the demand-supply equation," said Ashish Basil, a partner in Ernst & Young's telecom group.

    BATTERED IMAGE India's image as an investment destination was dented over the past year as the economy slowed, government reforms stalled and the telecoms scandals along with high profile graft cases heightened concerns about government policies.

    "This is a collective failure of the government of India," Subramanian Swamy, an opposition politician and also a petitioner in the case, said following the ruling.

    In declaring the licences "illegal and quashed," the court said in its ruling that the process of awarding them "was wholly arbitrary, capricious and contrary to public interest apart from being violative of the doctrine of equality".

    Police have charged six companies and 19 people, among them a billionaire owner of the Essar Group; top executives of Telenor's and Etisalat's India ventures and three from billionaire Anil Ambani's Reliance Group.

    Executives arrested in the telecoms case have been released on bail. Telenor and Etisalat say the case should not involve them because the licences were issued before they bought into the Indian market.

    Other owners of licences ordered cancelled include Loop Telecom Pvt Ltd; Videocon Telecommunications, part of India's Videocon group ; and S-Tel, part-owned by Batelco . Thirteen licences held by Idea, of which it is using seven, and three by Tata Teleservices are also affected.

    The Times of India on Mobile
     
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  5. trackwhack

    trackwhack Tihar Jail Banned

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    Awesome, absolutely awesome. My faith in the judiciary is somewhat restored. Now sentence Raja to 15 years of RI at least and 10+ years to all the corporate monkeys who were involved including messengers and agents like Radia.

    Though acquitted, both MMS and PC should resign due to the fact that they allowed this to happen? They had enough time and information to stop the mockery.
     
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  6. sayareakd

    sayareakd Moderator Moderator

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    good step by Supreme Court, some people have lost lot of money(good for them they wanted to make quick money at our expense), public is ultimate gainer. Now let the start fresh auction.
     
  7. Yusuf

    Yusuf GUARDIAN Administrator

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    The public is not going to gain anything. Expect your mobile bill to rise steeply as Airtel and Vodafone are going to dance their way to the bank.

    I still maintain that NOT auctioning 2G was the best thing for mobile telecom. We have nearly 900 million subscribers which could not have been so if the spectrum was auctioned as it would have resulted in high user charges.

    See how expensive 3G is.
     
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  8. Vyom

    Vyom Seeker Elite Member

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    The current telcos who were having the licenses (that the SC just scraped) bought it at many times the price from the original bidders. It is the same as auctioning just by not the government but by the private companies that got the licenses from Raja in the beginning and raked in mulaahs and shared the loot with you know whos who.
     
    Last edited: Feb 2, 2012
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  9. Yusuf

    Yusuf GUARDIAN Administrator

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    I have a problem with Raja violating process in the then policy and not the process itself.
     
  10. trackwhack

    trackwhack Tihar Jail Banned

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    Good point Yusuf, and I had exactly what Vyom had to say. Competition will bring prices down to the extent that every Indian can afford mobile telephony.
     
  11. Yusuf

    Yusuf GUARDIAN Administrator

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    Competition will not sell below costs.

    Let me put it this way. If the cost for all is 100, the lowest one can go is 101, but if the cost is 50, the lowest someone will go is 51.

    Auctions pushed costs up as seen with 3G.
     
  12. nitesh

    nitesh Mob Control Manager Stars and Ambassadors

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    I guess, we need to brace our selves for increase in calling charges
     
  13. Vyom

    Vyom Seeker Elite Member

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    The SC in specific has struck down the policy you are defending. That is the basis of the judgment that the process taken was arbitrary and unconstitutional.
     
  14. trackwhack

    trackwhack Tihar Jail Banned

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    Yes but thats where ROI comes in. The combined revenue of all telcos put together dwarfs the $20 billion that the spectrum would cost. These guys are still looking at ROI of 3-4 years on their investment. Margins will be thin for those 3-4 years and then shoot up.

    And even a 50% increase in calling chanrges would still keep the Indian mobile market the cheapest in the world.
     
  15. Vyom

    Vyom Seeker Elite Member

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    May be in the short term, yes.
     
  16. Yusuf

    Yusuf GUARDIAN Administrator

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    I cannot afford 3G that is all I know. Rs 100 for 100 MB in 3G where as in 2G I pay 48 for 1GB and 65 for 2GB data usage.

    Do the math. 3G will never be cheap no matter what the scale is or how much competition comes in. Even the ones whose licenses have been canceled don't provide cheap 3G.

    The Supreme Court has only bothered about the loss of revenue because of what it calls flawed policy. It's the SCs perception. The common man will lose out due to higher user charges that are likely.
     
  17. Yusuf

    Yusuf GUARDIAN Administrator

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  18. Vyom

    Vyom Seeker Elite Member

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    The 2G prices are not low because there was no auction. As I mentioned earlier, the companies maintaining the 2G licences now got their licences by way of buying the company shares of of those companies that were initially issued the licences by Raja at throw away prices. These "middlemen" earned vulgar benefits and shared the loot with the ministers accused (and their bosses). So everyone was merrymaking at the loss of the ex-chequer.

    Comparing 2G and 3G are like comparing 100cc bike with Hayabusa. 3G is a much more valued resource because it is more scarce than 2G, and it is also a more valued service than 2G.
     
  19. gogbot

    gogbot Regular Member

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    Technically , there is nothing more inherently expensive about operating a 3g service , right now the bandwidth is limited due to lack of investment. It's priced for early adopters, even if they drop the price now they lack the infrastructure to support all the load.

    Given enough time 3g rates will naturally go down.
    That is fact observed in countries all over the world.
    There is no debate regarding this.


    From what i understand .
    India already some of the lowest rates in the world , so low the industry was stagnating with dropping profitability. So much so in fact there was talk of 20%-30% increase in call rates. Now that price hike is going to happen sooner rather than latter.

    No one likes higher costs but i think in the long run this may be more of benefit. The Telecom market will be a little less crowded and hopefully better regulated.
     
  20. Yusuf

    Yusuf GUARDIAN Administrator

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  21. Yusuf

    Yusuf GUARDIAN Administrator

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    Aam aadmi drives a 100cc. They want costs that are low.
     

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