If there is clear evidence needed on how telecom operators got big money from underpricing of 2G spectrum, it lies in the way they raised capital from investors.
New telecom service companies were able to sell equity at high valuation even without investing anything on their networks – implying that the valuation came almost entirely from the potential in the underlying spectrum and the accompanying licences.
The firms were able to attract valuations that were more than five times of what they paid to the government as licence fee that comes along with start-up spectrum of 4.4 MHz.
At least two companies -- Swan Telecom and Unitech -- managed to sell fresh equity in their companies to foreign investors even though they had nothing in their companies except spectrum.
“The fact that these operators could draw huge foreign investments, even before establishing a foothold in the Indian telecom market would suggest that acquiring UASL (Universal Service Access Licence) and with it, allotment of 4.4 MHz of GSM spectrum for roll out, was the main factor which attracted the foreign investment,” the Comptroller and Auditor General said in his report on the 2G spectrum scandal.
Communications Minister A. Raja, who has denied irregularities, has argued that the new companies issued fresh shares to the investors and did not sell their shares. They did not make any profit by attracting investments, he said.
The CAG, however, says that the only asset in the companies was spectrum and hence it was the valuation of spectrum that was brought in the company.