The CAG has said that the finance ministry has been saying from 2003 that the price of spectrum should be determined through market determined mechanism. The Telecom regulatory Authority of India (TRAI) had also suggested in 2003 that the spectrum price should be worked out again.
However, the department of telecommunications (DoT) did not follow this advice and continued to issue new licences at a price determined through auction in 2001.
In 2003, the government amended the national telecom policy and allowed the CDMA players Reliance and Tata to offer full mobile services, also at the 2001 prices. In 2004, 28 new licences were issued; 22 were issued in 2006.
Raja joined the ministry in 2007, and in his regime 122 licences were issued.
“Initially it was not in the interest of the incumbent operators to go for auction of spectrum. Hence they lobbied for issuing licences and hence spectrum at the price determined at 2001 prices,” said an industry representative who did not want to disclose his identity.
The issue came to light when Raja issued licences to new operators. The incumbent operators started a hue and cry. Raja claims that he had broken a cartel of incumbent operators Airtel, Vodafone, Idea and Aircel.
How telcos gained
Two instances show how 2G licencees made money:
Case 1: Swan Telecom got licences for 13 circles along with 2G spectrum for Rs1,537 cr. It sold 44.73% equity to Etisalat International India Ltd for R3,217 cr even before establishing a network Implied valuation of the Swan Telecom licences. Rs 7,129 cr
Case 2: Unitech acquired licences for pan India operations for R1,650 cr It sold 67.25% equity for R6,120 cr to Telenor, even without a telecom network Underlying valuation of Unitech licences. Rs 9,100 cr