In The Eye Of The 2G Storm

The pace of growth of India's telecommunications industry has fascinated investors for some time now. But currently it is hogging public attention for all the wrong reasons. The 2G licence scam has cast a dark shadow on the industry and its leaders alike. Three government agencies — Central Bureau of Investigation (CBI), Parliamentary Public Accounts Committee (PAC) and Joint Parliamentary Committee (JPC) — are trying to dig out facts and establish what went wrong and who all crossed the line. The Supreme Court, of course, will have the final say on the matter, as has been the case in many telecom controversies since the time the sector was opened for private and foreign players. Here's a brief look at the charges made by these agencies and the defences presented by the business leaders at various fora so far.


Ratan Tata, chairman, Tata Group
CHARGES
Influenced former telecom minister A. Raja's reappointment as communications minister in UPA-II and opposed appointment of Dayanidhi Maran as communications minister

Financed Unitech to pay for the 2G licence fee at a short notice
Voltas, a Tata company, allegedly sold property below the market price to a close associate of Kanimozhi, DMK's Rajya Sabha MP
 
DEFENCE
Had a bad chemistry with Maran, but never influenced appointment of Raja. Opposed Maran's bias towards GSM operators that harmed the interest of Tata Teleservices, which used CDMA technology

Tata Group companies work independently. The loan was not given with a view to make Unitech a front-end company

It was a dispute between the tenant (Voltas) and a family that had   nothing to do with the DMK or its family members, when the lease for sale was signed in 1975


Anil Ambani, chairman, R-ADAG
CHARGES
Reliance Communications (RCom) funded Swan Telecom to acquire 2G licence

RCom influenced Department of Telecommunications (DoT) to release (dual technology) GSM spectrum ahead of others

DEFENCE
Neither Reliance Telecom nor RCom, or any Reliance Anil Dhirubhai Ambani Group (R-ADAG) individual, company or affiliate held even a single share in Swan Telecom at the time of grant of the 2G licence in January 2008

Neither Reliance Telecom nor RCom, or any R-ADAG individual, company or affiliate has obtained any benefit, directly or indirectly, from the grant of 2G licence to Swan Telecom in January 2008

The company did not influence the policy or any department — within the government — to secure anything that was not within the existing rules


Prashant Ruia, group chief executive, Essar Group
CHARGES
Essar's stake in Loop Telecom is in violation of the licence conditions. It gained licence ahead of those in the queue. Loop acted as the front company of Essar Group. The company changed the main object clauses in its Article of Association to include the telecom sector for meeting the eligibility criteria, after submission of the application

DEFENCE
Essar Group and its people have less than 2 per cent stake in Loop Telecom. No licence condition has been violated. Interest in Loop was within the laws of the land


Sanjay Chandra, managing director, Unitech
CHARGES
Unitech sold equity to a foreign company, Telenor, before it rolled out service. Unitech had prior information of advancement of cut-off dates and had the cash ready to pay for the 2G licence. It was a front company for Tatas

DEFENCE
The amount has been invested back into the company. No individual or the company has taken the money out of Unitech Wireless, generated out of the stake sale to Telenor. The deal with Tatas was not completed. Further, the money was taken much before the telecom licence at 12 per cent interest rate. This at a time when banks were offering loans at 8-10 per cent

Venugopal Dhoot, chairman, Videocon Industries
CHARGES
Submitted false documents about its authorised share capital. Corrected it to fit the bill later

DEFENCE
All process and procedures were followed. Corrected the documents proactively — within the rules — without DoT pointing it out to them. It was an aberration and was not done deliberately


Shahid Balwa, managing director, DB Realty
CHARGES
Swan Telecom promoter (Shahid Balwa) was acting as a front for RCom. Swan sold equity to Etisalat, without a single subscriber. Kickbacks were paid to Raja. Money was routed through companies in Mauritius and Dubai

DEFENCE
RCom's stake in Swan was less than the prescribed limit. DB Realty was the promoter company and it had made necessary changes in the company's MoU, when it got the 2G spectrum licence. The equity was sold but the money was ploughed back into the company, and the promoters did not benefit from it. Some loans were given, but not for telecom. It was recovered with interest; hence there is no conflict of interest

(This story was published in Businessworld Issue Dated 18-04-2011)