New players got licence that came with start-up 2G spectrum at throwaway prices

When it came to issuing licences for 2G services in 2008, the then Telecom Minister, A. Raja, overlooked the limited availability of spectrum in at least 12 telecom circles and issued Letters of Intent (LoIs) that were unviable to support new players. As a result, new entrants got licences that came with start-up 2G spectrum at throwaway prices; and it was also ensured these new players did not have to participate in any future auction of spectrum as recommended by the Telecom Regulatory Authority of India.

In its presentation before the Joint Parliamentary Committee, which is going into the 2G scam, the Central Bureau of Investigation pointed out that in 2008 when 122 licences were issued, the Department of Telecom did not follow the National Telecom Policy-1999 as it failed to consider the important factor of spectrum availability.

For instance, in the Delhi circle, just 8 MHz spectrum was available, viable for accommodating only one operator but the DoT issued LoIs to six players. The most curious case is the Rajasthan circle, where only 1 MHz spectrum was available and had no scope for accommodating any new player, but still the DoT issued LoIs to four new companies.

Similarly, in the Gujarat and Punjab circles, only 9 MHz and 15 MHz spectrum was available to support two and three players respectively but five LoIs were issued in each of the two circles. In the Uttar Pradesh East and West circles, 13 and 10 MHz spectrum was available to support two players each, but DoT gave five LoIs each in circle.

In Haryana, where 8 MHz spectrum was available to support just one player, six LoIs were issued, while in Bihar the available 18 MHz spectrum was viable for only four players but six LoIs were given. In Jammu and Kashmir (10 MHz), West Bengal (13 MHz), Himachal Pradesh (12 MHz) and northeast/Assam (10 MHz), the spectrum available could have supported only two players each, but the DoT issued seven LoIs each in J&K and northeast/Assam, and five each in West Bengal and Himachal Pradesh. It was only in Mumbai, where 20 MHz spectrum was available to support four operators, a similar number of LoIs were given.

Significantly, it was after the TRAI's recommendations, issued in August 2007, on the pricing of spectrum that new companies were prompted to apply for new licences in big numbers. The TRAI had clearly stated: “The entry fee as it exists today [in 2007] is, in fact, a result of the price discovered through a market-based mechanism applicable for the grant of licence to the 4t{+h} cellular operator. In today's dynamism and unprecedented growth of the telecom sector, the entry fee determined then is also not the realistic price for obtaining a licence. Perhaps, it needs to be reassessed through a market mechanism [auction].”

The CBI said that after the receipt of the TRAI recommendations in 2007, there was a spurt in the number of applications. It said Mr. Raja's private secretary, R.K. Chandolia, was monitoring the receipt of applications. A total of 232 applications were received till September 2007, but when the DoT announced that applications would not be accepted after October 1, 2007, the number rose sharply to 575.

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