Posted by: John Elliott | November 11, 2008

India’s telecom minister “should be fired” for a company’s 700% profits

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!

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Responses

  1. [...] were arousing concerns eight years ago. The 2G telecom scandal that erupted in 2010 had been written about (see my blog) for more than two years. Land allocations and operating review terms in the 2006 franchise won for [...]

  2. [...] were arousing concerns eight years ago. The 2G telecom scandal that erupted in 2010 had been written about (see my blog) for more than two years. Land allocations and operating review terms in the 2006 franchise won for [...]

  3. [...] were issued in January 2008. That must have been the worst day of his long career. He knew that he could have stopped the rot  some four years ago but had not done so because the Congress Party, led by Rahul’s mother Sonia [...]

  4. [...] DMK party who, the tapes revealed, has links with Radia. He survives in his job, even though he was a candidate to be sacked as along ago as [...]

  5. [...] [...]

  6. This loot of the Indian exchequer was apparently planned in collusion with an erstwhile Indian telecom “czar” who has made his living in buying and selling Indian telecom licenses. This czar who is currently restricted from owning telecom licenses, has used a proxy to obtain several licenses using his proximity to Raja’s political bosses. Understandably the company to whom he sold his earlier mobile business and with whom he is already embroiled in litigation is watching this development very closely.

    From a larger perspective, this illustrates a malaise in Indian public policy. Is there an integrated policy initiative governing sale of such national assets? Airwaves are a very precious national commodity and Raja has been dispensing them like candy in a sweetshop to his personal favorites.

  7. I think it is time we moved beyond Sonia Gandhi. If Mr. Singh was so concerned about running a clean administration he could have said ‘ENOUGH’ a long time back. Shibu Soren, the proving of majority, Raja, Naveen Patnaik as Nero in Orissa, the black mail of the communists, the alliance of convenience with SP presently.

    He is not being blackmailed is he? All of them are self serving. Mr. Singh has been chosen because he is the least cumbersome. He knows that. But I don’t feel sorry for him. He is probably the right man in the right job – but unfortunately he is not a leader.

    Chidambaram could have been a better PM – at least his voice has strength. But being a Tamil he probably hates Hindi and never wants to learn it.

    Is Hindi important for being the PM?

  8. It is indeed sad that the whole of India is watching this “loot” with muted silence. Common man is so worried about his hand to mouth existence that he doesnt care about this.
    I am an Indian and I too do feel that India can no way achieve a super-power status if its own people watch all this injustice without any reaction. One does feel sorry for Manmohan Singh. Wrong man in the wrong job. Sonia and co have made a mockery of the Indian constitution.

  9. Somebody has to disturb the status quo, bell the cat, answer one’s conscience. Raja’s act of omission and commission are staring us and mocking us, but doesn’t matter…what are 50,000 crores to a country like India.

    Shame.


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