It’s good to see a newspaper coming out with a clear line – and one which is equally clearly right. Mint, a leading India business daily, ran a front page comment this morning headed “Raja should be fired”, pointing out that decisions taken by A.Raja, the telecom minister, “have cost the government dear”.
Mr Raja’s “mistake” (a kind euphemism if ever there was one) was that he did not auction new spectrum (needed for mobile communications). Instead, he allocated it early this year to companies that applied, on a first-come-first-served basis, for fees that were fair in 2004 when there were only about 50m mobile phone subscribers in India – now there are 310m so the fees should be much higher.
The Business Standard ran an editorial on October 31 headed “Licensed to make a killing”, and mentioned how spectrum had been “handed over” to a few “select” (another neat choice of words) firms.
Two of those companies, Unitech and Dynamix Balwas’s Swan Telecom, had absolutely no telecom experience but have now made huge profits out of the allocations.
When the awards were made, I asked a contact why such infrastructure and real estate companies were entering telecom. I was told that Mr.Raja had previously been environment minister – a job that brings contact with real estate companies, which become close to ministers and officials so that they obtain all the permissions and advantages that are available. So what could be more logical than to see such companies following Mr Raja to the telecoms ministry – and benefitting so royally.
Unitech paid $350-400m for its spectrum allocation, and then sold a 60% stake to Telenor of Norway two weeks ago for $1.3bn, putting a valuation of $2.1bn on the company. That’s a profit of about 700% in less than a year – and just for owning the spectrum without any customers or experience.
Swan similarly paid about $340m and sold 45% of its equity for $900m, giving the company a valuation of $2bn – a six-fold increase. In both cases, the extra funds more than filled coffers depleted by the dramatic turn-down in the real estate market.
The alarming point about this story is not just that a cabinet minister has been conducting these events, but that nothing is being done to stop him. Mr Raja was chosen for his ministerial slot not by the prime minister, Manmohan Singh, but by the chief minister of his Tamil Nadu-based DMK political party – such is the way in coalitions that depend for their continuation in office on the support of regional parties that have no national perspectives.
Manmohan Singh has publicly said that spectrum should be auctioned, but can do nothing to rein in Mr Raja – such is the way in coalitions.
What a way to run a would-be super-power!