What hit telecom sector more: 2G spectrum case or projected loss?
A special CBI court Thursday acquitted all the accused, including former telecom minister A Raja and DMK MP Kanimozhi, in 2G spectrum case.india Updated: Dec 22, 2017 17:25 IST
A special Central Bureau of Investigation (CBI) court Thursday acquitted all the accused.
Most companies named in the original charge sheet have wound up operations. “None of the companies are coming back. This verdict means nothing for the sector,” said an industry analyst on condition of anonymity.
“This is something of the past and has no bearing on the industry so many years later. Only political dividend can be gained,” another analyst said, also requesting anonymity.
“The impact of the judgement on the sector is minimal. Most of the impact due to the 2G issue, especially the allocation of spectrum, has already been seen in the marketplace. Players have either left the country or those that bought licences – Telenor, Videocon – are in the process of exiting,” Mahesh Uppal, director, ComFirst India, a communications consulting firm, said.
In 2008, during A Raja’s tenure as telecom minister, 2G spectrum and licenses were awarded on a first-come, first-served basis to operators, at a price discovered in an auction held seven years earlier.
Based on a report submitted by the Comptroller and Auditor General of India, which said 2G licences were issued to telecom operators at throwaway prices, causing a presumptive loss of Rs 1.76 trillion to the exchequer, the apex court cancelled 122 telecom licences and spectrum allocated in January 2008, holding that the process of allocation was flawed. It further directed that spectrum or any natural resource must be auctioned.
Apart from dealing a political blow to the then Congress-led UPA government, the sector too went into a tailspin. As decision-making ground to a halt, licencees went bankrupt, resulting in thousands of jobs being lost. Consumer service quality was also impacted as investment in the sector dire up.
“There will be political impact. It will reopen issues on loss to the exchequer. While the issues are not identical, the spirit of the SC and the CBI judge seem to be at variance,” Uppal added.
Experts believe the sector is unlikely to see any impact. “These kind of judgments keep coming,” an official at the Department of Telecommunications said. “The government has realised that auction is the best way to allocate a public resource and that will stay,” the official added.
But, an interesting takeaway from today could be the prices at which spectrum will be auctioned going forward.
“Because the case crippled the system and decision-making, the auction prices were never curated. Nobody intervened to correct these prices; they are still very high,” an expert said, requesting not to be named. The government needs to take a hard look at the spectrum prices so that the investment by companies can actually go into upgrading networks and not into a bidding war, the expert added.