18-01-2013, 12:39 PM
2G Spectrum Scam Question Answers
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1) What is spectrum? What is its relation with mobile phone services?
Spectrum is airwaves. Each operator is assigned a set of frequencies. In normal basic
telephone service, a pair of wires is used for communication. But in case of
mobile/wireless communications, airwaves are used instead of wires. These
spectrum/airwaves are licensed by the Government. It is allocated in Mega Hertz
(MHz) in telecom licenses. 4.2 MHz is given as start-up spectrum, which is topped up
by 1.8 MHz to make it 6 MHz (4.2 + 1.8 MHz), and so on.
2) Why spectrum is called a scarce national resource?
Worldwide different frequencies are used for different purposes depending on the
characteristics of each frequency. For enabling seamless communication throughout
the world, the international telecom organizations (operators, manufacturers,
government of each country) have specified certain frequency bands for mobile
services. These frequencies have been standardised. Every second, there are
thousands of simultaneous calls. Every call has to be assigned a different frequency so
that they do not cause interference. The frequencies are limited. This is why it is
called scarce resource.
3) What is the 2G spectrum and 3G?
2G is the 2nd Generation of mobile phone services. Next phase of mobile services is
3G, or 3rd Generation. The difference between 2G and 3G is that we can have faster
internet services in 3G, whereas in 2G the speed is slow.
4) How the telecom operation is administered?
The entire country is divided into 22 Telecom Circles and Metros. Each state is one
circle, like Bihar, UP (E), UP (W), Tamil Nadu, etc. All the seven sisterly states in the
North East except Assam, comes under a single circle called North East Circle. There
are now three Metros (Delhi, Mumbai, and Kolkata), the fourth Metro (Chennai) was
combined in Tamil Nadu circle. For every Circle or a Metro, a separate telecom
license is issued. For each license, separate applications are to be submitted. We call a
company is having a Pan-India license, when that company has telecom licenses for
all the 22 Telecom Circles and Metros. A Pan-India license (in fact 22 licenses) was
issued for an Entry Fee of Rs 1,658 crore during an open bidding in the year 2001.
This rate eventually became reference rates for licenses issued in future under FCFS
policy, and is a matter of scam.
5) What is FCFS policy?
Under First Come First Serve (FCFS) policy, licenses with start-up spectrum (4.2
MHz) were issued for mobile services on the basis of who applies first. This policy
was good only when there were very less takers for licenses.
Between 2003 and 2006, there were only 51 applications for the licenses and all of
them were issued licenses on FCFS basis. That means there were very less takers at
that time. They were charged Entry Fess @ Rs 1,658 crore for pan-India license
determined in the year 2001.
6) What is the 2G spectrum Scam?
The government awarded 122 telecom licenses with 2G spectrum in January 2008 at
2001 rates (Rs 1,685 crore) ignoring the current market value of the spectrum. In
February 2007, Hutch sold its 67% equity to Vodafone at Rs 75,000 cr signaling
substantial increase in spectrum value. Even if 15% of this is considered to be
spectrum value, then it is Rs 11,250 crore per pan-India licenses. However, Raja
ignores this price. In November 2007, S-TEL offered Rs 6,000 cr for pan-India
license; in December 2007, it increased the offer to Rs 13,752 crore. This was also
ignored by Raja.
After obtaining licenses at cheap rates, the private companies sold (diluted) their
equities to foreign telecom companies at a very high price. Every company that had
pan-India licenses was valued at about Rs 10,000 cr in which it had assets of 2G
spectrum (Rs 1,659 cr. Thus, the difference in these figures (Rs 10,000 cr and Rs
1,659 cr) is per pan-India license loss to the Government and gain to private
companies.
7) What was the role of the former telecom minister A Raja in this scam?
He played multiple tricks to ensure that the spectrum is allocated to its favourite
companies.
First, Reliance Communication (Anil Ambani Group) wanted entry into GSM
segment as there was not much of demand in CDMA. The company applied for fresh
license through Swan, and also applied for dual-technology permission. In October
2007, Mr Raja allowed dual technology. But it appears that Reliance gave away the
control of Swan to DB Group (Shahid Balwa), who was close to Mr Raja. The
advantage with this company (Swan) was that it had already applied for licenses in
March 2007.