10 companies being probed in Rs60k cr telecom scandal

The probe into the telecom spectrum scandal, in which the government reportedly lost revenue worth Rs60,000 crore due to alleged underpricing of precious radio frequencies used for mobile services, has been widened with the Central Bureau of Investigation (CBI) searching 10 telecom companies on Friday. The man at the centre of the storm, telecom minister A Raja, faced Opposition calls to resign, but he refused to do so.

The scandal involves the sale of 2G (second generation) radio spectrum to telecom companies in January 2008. Companies applying for all-India telecom operations had to pay Rs1,650 crore as licence fees and were given 4.4 mhz of start-up spectrum for free. But some companies immediately started hawking the spectrum at huge mark-ups to the licence fees they paid to the government.

This was done indirectly through the sale of stakes in their mobile companies for phenomenal profits soon after acquiring licences in a skewed allocation process. While Swan Telecom sold a 45% stake to UAE-based Etisalat group for Rs4,195 crore, Unitech Wireless sold 67% to Norway-based Telenor group for Rs6,120 crore. Chennai-based STel group allegedly sold 49% to Betel for nearly $225 million, while Shyam Teleservices sold 70% to the Russian firm Sistema.

On Thursday, the CBI searched Sanchar Bhavan (the department of telecom’s offices in Delhi). On Friday, the bureau reportedly went to the premises of 10 telecom firms nationwide to check on spectrum licence documents of the operators. Though the CBI did not name any company it visited or searched on Friday, it seems to have extended the probe from eight companies to 10. It is probing companies that received licences in January 2008 and those that got licences after 2001, when the first-come, first-serve licence allocation policy was announced.  

“Ten telecom companies whose names have emerged in investigations have been raided. We have seized documents pertaining to the allocation of licences to these companies by the department of telecommunications and the subsequent divesting of stakes by these companies,” said a senior CBI official. Nineteen premises in the capital and elsewhere were raided in Friday’s action.

The CBI had registered a case under the Prevention of Corruption Act on Wednesday. Day-long raids were carried out on Thursday by the agency at the telecom ministry’s office at Sanchar Bhawan. The bureau then issued a statement claiming irregularities in the award of unified access services to private companies in January, 2008.

The CBI said the licences were given at dirt cheap prices at 2001 market rates. Further, the telecom ministry did not go in for competitive bidding and adopted a “first come, first served” approach to spectrum seekers. This is what enabled many companies to hawk licences for huge premia soon after getting them. The ministry made matters worse by suddenly announcing a cutoff date in September, 2007, thus artificially restricting the number of entrants.

The political finger-pointing began on Friday with opposition parties calling for the resignation of telecom minister Raja. Even the ruling Congress appeared uncomfortable even while defending Raja in public.

Congress party spokesperson Manish Tiwari said that FIRs had been filed, but these FIRs had only mentioned the names of officials in the department of telecommunications. “Therefore, questions of impropriety do not arise,” he said.

The party was, however, annoyed with Raja’s contention that even prime minister Manmohan Singh knew about the 2G spectrum allocation. “What does the prime minister have to do with Trai guildelines? That is a departmental matter,” said a senior Congress leader.

Prime minister Manmohan Singh had opposed the entry of Raja into the UPA-II cabinet due to the bungled spectrum allocation issue, but the DMK - one of the Congress’ biggest alliance partners - forced him to accept Raja.

On Friday, both the BJP and the CPI(M) came out all guns blazing against Raja. “The spectrum allocation scam runs into thousands of crores of rupees. This is the first time that the CBI has raided the offices of a minister. There is no reason — moral, ethical or political — for him to continue as communications minister,” BJP spokesperson Ravi Shankar Prasad said.

He demanded that Raja be sacked forthwith by the prime minister and CBI be given a free hand in the investigations. Prasad said that if Raja continued as minister “there were apprehensions that he may create impediments in the investigation.”

The CPI(M) questioned the PM’s commitment to ethics with the continued presence of Raja as telecom minister. “The minister has refused to resign. Now it is up to the prime minister to sort out the matter,” said party spokesman Sitaram Yechury.

Raja’s continuation is likely to become a sticky issue for the government and the ruling party. He had been accused of graft on the same issue in 2008-09 but managed to continue due to the Congress’ dependence on the DMK. This time round, the Congress is in a better position while the DMK is ridden by faction fights between the Karunanidhi family siblings. Raja may just fall through the cracks on this one.