india anatomy of the 2g scam

7/29/2019 India Anatomy of the 2G Scam

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www.time4education.comTriumphant Institute of

Management Education P Ltd

Nyayapati Gautam

2GAnatomy of the

Scam


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Background

In 1994 there were three incumbents in thefixed service sector i.e., DoT, MTNL and VSNL.

DoT operated all over the country exceptDelhi and Mumbai. MTNL had operations inDelhi and Mumbai and VSNL providedinternational telephony.

In1994 telephone density in India was 0.8 per100 persons as against world average of 10per 100 persons.


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National Telecom Policy 1994 Affording telecommunication for all and

ensuring the availability of telephone ondemand.

Providing certain basic telecom services ataffordable prices to all people & covering allvillages.

Giving world standard telecom services; Creating a major manufacturing base and

major export of telecom equipment Protecting the defence and security interest of

the country.


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Additional resources required to achieve therevised targets was over Rs.23,250 Crores.

Private investment and association of theprivate sector was necessary in a big way tobridge the resource gap in order to achievethe revised targets set in NTP 1994.


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NTP 1994 criteria for the selection of Cos.: Track record of the company; Compatibility of the technology;

Usefulness of the technology being offeredfor future development;

Protection of national security interests; Ability to give the best quality of service to

the consumer at the most competitive cost; and Attractiveness of the commercial terms to the

Department of Telecommunications.


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Objectives of NTP 1999: to make available affordable and effective

communications for the citizens.

To provide universal service to all uncoveredareas including the rural areas and alsoprovide high level services capable ofmeeting the needs of the countrys economyby striking a balance between the two.

To encourage development oftelecommunication in remote, hilly and tribalareas of the country.

To create a modern and efficient telecominfrastructure India an IT superpower.


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To convert PCOs wherever justified into PublicTeleinfo centres having multimedia capability

To transform in a time bound manner, thetelecommunications sector in both urban andrural areas into a greater competitiveenvironment

Providing equal opportunities and levelplaying field for all players.

To strengthen R&D efforts in the country andprovide an impetus to build world classmanufacturing capabilities.

To achieve efficiency and transparency inspectrum management..


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Spectrum managementunder NTP 1999

Growing demand - essential that the spectrumis utilized efficiently, economically, rationallyand optimally.

There is a need for a transparent process ofallocation of frequency spectrum

Essential to revise National FrequencyAllocation Plan (NFAP). NFAP was to be madepublic by the end of 1999 detailinginformation regarding allocation of frequencybands for various services.

Adequate spectrum is to be made availableto meet the growing need oftelecommunication services.


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There is a need to have a transparent processof allocation of frequency spectrum:

Spectrum usage fee shall be charged;

An Inter-Ministerial Group to be called asWireless Planning Coordination Committee asa part of the Ministry of Communications forperiodical review of spectrum availability and

broad allocation policy should be set up. Massive computerization in WPC Wing would

be started. Target all operations completelycomputerized by the end of the year 2000.


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TRAI

An independent regulatory body set up in1997 with a view to assure investors that thesector would be regulated in a balanced, fairand competitive manner.

The Government proposed to set up anindependent Telecom Regulatory Authority. Italso decided to give statutory status.


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TRAI Powers & Functions

Need and timing for introduction of newservice provider; (Mandatory for Govt toseek recommensation)

Terms and conditions of licence to a serviceprovider; (same as above)

Revocation of licence for non-compliance ofterms and conditions of licence;

Measures to facilitate competition andpromote efficiency in the operation oftelecommunication services so as to facilitategrowth in such services;

technological improvements in the servicesprovided by the service providers;


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Measures for the development oftelecommunication technology and any othermatter relatable to telecommunication industryin general;

Efficient management of available spectrum.


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TRAI to forward its recommendations within aperiod of 60 days. Central Government canissue a licence to a service provider if norecommendations are issued from TRAI within

said period. If the Central Government, feels that the

recommendations cant be accepted or needsmodifications, it can send it back to TRAI forits reconsideration. TRAI needs to get backwithin 15 days.

After receipt of further recommendations, ifany, Central Government is required to takefinal decision.


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Unified Access ServiceLicence: 2004-2007

TRAI recommendations: Within six months Unified Licensing regime should

be initiated for all services covering allgeographical areas using any technology.

Existing operators be given option to continueunder present licensing regime or migrate to newUnified Access Licensing regime in the existingcircles.

In Unified Access Licensing regime the service

provider may offer basic and/or cellular servicesusing any technology.


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In the meantime DoT on 11 Nov 2003 issuedguidelines for Unified Access (Basic andCellular) Service License laying down theprocedure for migration of existing operators.

It also provided that with the issue of saidguidelines all applications for new AccessServices Licence shall be in the category ofUnified Access Services Licence.

However, in these guidelines no specificprocedure was prescribed.

Some applications were made on 12 Nov, forgrant of UASL, in the form prescribed forerstwhile BSLs.


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Chairman TRAI by his letter No. Nil dated14.11.2003 communicated to Secretary, DoTthat entry fee for new Unified Licensee wouldbe the entry fee paid by 4th CellularOperator and in service areas where there isno 4 Operator, entry fee paid by the existingBSO fixed by Government.

This was accepted by DOT. It was also

approved that such new licences in thecategory of UASL would be issued on FCFSbasis on the basis of applications.

No guidelines regarding procedure for grant

of UASLs were issued nor published following


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UASLs during 2008-2009:

The recommendations of TRAI dated28.8.2007, received by DoT on 29.8.2007,were examined by an internal Committee ofDoT which was constituted on 21.9.2007.

Pending consideration of the saidrecommendations of TRAI, on 24.9.2007 theMinister took a decision to fix a cut-off datefor the receipt of applications for UASL as

1.10.2007. On the same day a Press Release came to be

issued notifying cut off date.


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Procedures vs Policy

DoT was required to seek recommendations ofTRAI as to the need and timing for introductionof a service provider. It did not and DoT, on17.11.2003, approved formulation ofprocedure for accepting the applications forgrant of UASLs. (procedure similar to BSL)

Further, on 24.11.2003, the Ministerapproved the formulation of procedure forgrant of UASLs on the basis of First ComeFirst Served as against through Multi Stagebidding process.


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TRAI had specifically stated that grant ofUASL had to be through multi-staged biddingprocess, as followed in the case of 4 th Cellularoperators.

DoT contrary to the said recommendationsformulated the procedure on 24.11.2003 tocollect entry fee from new operators at therate paid by 4th operators thus deviating

from the policy framework of NTP 1999. To be referred back to TRAI if not

acceptable.


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That new licences in the UASL regime wouldbe issued licences on the FCFS basis, was notmade known to the public. No new guidelineswere issued.

Entry fee not to be revised - since the matterhad financial bearing, concurrence of Ministryof Finance ought to have been taken.

Relating to important Government contractsMinistry of Law and Justice is required to beconsulted. DOT ignored the opinion of Ministryof Law and Justice.


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Procedure formulated whereby the processingof applications for grant of UASLs wasrestricted to only such applications which werereceived up to 25.9.2007 when the last datefor receiving an application was 1.10.2007,is patently unfair.

FCFS as adopted by the DoT was notconsistent with the NTP 1999,

recommendations of TRAI and the Cabinetdecision.

The FCFS procedure was adopted andapplied, that too without consistency.


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Prior to 07.01.2008, the date of receipt ofapplications in DoT was reckoned for thepurposes of FCFS.

After 07.01.2008 the date of compliance ofLoI was reckoned for purposes of FCFS.


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Consistency vs Deviation

Notified guidelines for grant of BSLs dated25.1.2001 stipulated that in case anapplicant is found eligible for grant of BSL,the applicant shall sign licence agreementwithin thirty days failing which the offer ofgrant of licence was to stand withdrawn.

No provision for extension of time forcompliance with LoI.

However, extension of time spreading toseveral months, was granted to Tata TeleServices Ltd. for compliance with LoIs issued toit.


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Time was extended for rectifyingdiscrepancies in application of Idea CellularLtd. dated 4.8.2005 for grant of UASL forMumbai service area for over a year for IdeaCellular Ltd. and LoI was issued only on20.11.2006.


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In case of grant of UASL to Idea Cellular Ltd.for Mumbai service Area, application forgrant was received in DoT on 3.8.2005.

Tata Industries Ltd. was holding 31.69%equity which meantIdea was ineligible forgrant of UASL.

Breach of restriction: An applicant must nothave substantial equity in any other operatorin the same service area.


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While priority of Idea for Mumbai area wasretained from date of its application,subsequent transfer of equity by TataIndustries Ltd. was treated as compliance witheligibility requirement.

This amounted to violation of laid downprocedure where in an applicant could retainseniority though on the date of application

was ineligible and acquired eligibility onlylater.


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Allianz Infratech Pvt. Ltd., had initiallyindicated that the net worth of its promotersbeing four individuals, was Rs.600 crores.

They later claimed it was in excess of Rs.2950crores.

Allianz originally had indicated that itspromoters were four individuals, subsequently,in place of two individual promoters acompany stepped in. (Swan Telecom -Etisalat)


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Swan Telecom Pvt. Ltd. submitted a certificateof Company Secretary to establish prescribednetworth and paid up capital requirementsfor claiming eligibility.

The details of one of its promoters, viz., TigerTraders Pvt. Ltd. as on the date of theapplication was not available.

Decision was taken by DoT to issue LoI


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As per practice followed by WPC wing forallotment of Spectrum the applicants havebeen accorded priority on the basis of dateof submission of their applications in theOffice of DoT.

In the LoI for amendment of access licence toprovide for dual technology as regards grantof spectrum, it has been stipulated that the

priority for the purpose of FCFS basis shall bereckoned from the date of compliance interms of LoI, viz., payment of additionallicence fee, thus deviating from laid down

procedure.


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The allotment of initial spectrum, to variousservice operators, viz., Datacom Solutions Pvt.Ltd., Nahan Properties Pvt. Ltd., EssarSpacetel Ltd., Loop Telecom Pvt. Ltd. and TataTele Services Ltd. in Bihar service area, whowere granted telecom access licence in themonths of February/March, 2008.

Proposal for earmarking spectrum in order of

priority based on applications for spectrumwere put up on 9.9.2008.

However, on 23.9.2008, the Wireless Advisorput up a note that all new licencees in Bihar

may be included district wise and then the file


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Subsequently, a note was put up including inthe list, the entitlement of Allianz Infratech Pvt.Ltd., which had applied for spectrum only inthe month of August, 2008 and only then wereall the cases were processed. Together.

Almost similar is the case in M.P. A note wasput up in May, 2008 for grant of initialspectrum to four operators in order of their

priority. However the Wireless Advisor on 19.8.2008

put up a note to the effect file withdrawn.Please put with latest receipts


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Subsequently, the proposal was again put upby including the proposal for earmarkinginitial spectrum for Allianz Infratech Pvt. Ltd.,which had applied for grant of spectrumsubsequently i.e., on 7.8.2008.


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Fair and Transparent?

At the time of decision taken in the year 2003to consider the applications for grant of UASLon first come first serve basis, applicationsfrom two operators, namely, Bharati AirtelLtd. and Tata Telecom Services Ltd., werealready pending.

As such FCFS as the basis for grant of UASLcould have been unfair to other intending

applicants. There was no provision for extension of

period of compliance. Extension of time forcompliance with terms of LoI was granted to

some of the applicants for different reasons


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After the decision to grant of UASLs to allapplicants who had applied up to 25.9.2007and to reiterate priority from the date ofcompliance with LoI, was made, the first PressNote dated 10.1.2008 was issued at about1.47 P.M. notifying the same.

It was further notified that DoT has beenimplementing FCFS basis for grant of UASLs

under which initially an application, which isreceived first will be processed first andthereafter, if found, eligible applicant will begranted LoI.

Then whosoever complies with the conditions


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This was never a practice in the past. Further, the first Press Note dated 10.1.2008

was published on the websites of DoT and PIBonly.

The first Press Note dated 10.1.2008contained critical information as to drasticchange in procedure followed by DoT.

The priority already acquired by applicantsby virtue of date of submission of applicationswas to change.

It was published on the websites withoutpublications in newspapers and withoutindividual communications to all the applicants


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On the same day a second press release wasissued by DoT at about 2.45 p.m. requiringthe representatives of applicants to collectLoIs on the same day between 3.30 p.m. and4.30 p.m.

The second press release requiring theapplicants to collect LoIs simultaneously ineffect took away the priority acquired by

applicants who had applied earlier. This release was very significant as it was only

after collecting the LoI that an applicant couldcomply and the applicant complying earlier

was to get priority.


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This press release was again published on thewebsites of DoT and PIB.

No record of individual communications to allapplicants having been sent is available.


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The LoI for grant of UASL issued on 0.1.2008stipulated fifteen days as the period withinwhich the terms of LoI had to be complied withby an applicant.

Having stipulated the period for compliance,there was no justification in granting priorityto an applicant, who complied with LoI beforethe fifteen day period and/or earlier than

other applicants.


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Some of the applicants collected the LOIs andalso submitted compliance on the same day.

Their DD was dated before Jan 10. In case Unitech Infra, Volga Properties Pvt.

Ltd., Azka Projects Ltd., Azare Properties Ltd,Unitech Builders & Estates Pvt. Ltd., AdonisProjects Pvt. Ltd., Hudson Properties Ltd. whilethe LoIs were issued on 10.1.2008 andcompliance was submitted on the same day,the demand drafts for payment of entry feewas dated 24.12.2007.


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In case of Idea Cellular Ltd., while LoI wasissued on 10.1.2008 and the compliance wassubmitted on the same day, the demand draftfor payment of entry fee is dated 8.1.2008.

For the first time the procedure for accordingpriority to those applicants, who compliedwith the terms of LoI first, was mentioned inthe letter of MoCIT to the Prime Minister

dated 26.12.2007. The decision in the files of DoT is taken only on

7.1.2008. The decision was made public through press

release dated 10.1.2008.


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