In 2008, during A. Raja’s tenure as telecom minister, 2G spectrum and licences were awarded on a first come, first served basis to operators, at a price discovered in an auction held seven years earlier. Photo: Indranil Bhoumik/Mint
In 2008, during A. Raja’s tenure as telecom minister, 2G spectrum and licences were awarded on a first come, first served basis to operators, at a price discovered in an auction held seven years earlier. Photo: Indranil Bhoumik/Mint

2G scam verdict: Political ripples but few gains for the telecom sector

The 2G spectrum scam verdict means nothing for the telecom sector as most of the companies mentioned in the chargesheet have wound up operations

New Delhi: Political parties may exploit Thursday’s court verdict acquitting all accused in the so-called 2G spectrum scam of 2008, but it does nothing to change the fortunes of the telecom sector, analysts said.

A special Central Bureau of Investigation (CBI) court on Thursday acquitted all accused in the case.

Most companies named in the original chargesheet have wound up operations. “None of the companies are coming back. This verdict means nothing for the sector", said a telecom industry analyst on condition of anonymity.

“This is something of the past and has no bearing on the industry so many years later. Only political dividend can be gained," another analyst said, also requesting anonymity.

“The impact of the judgement on the sector is minimal. Most of the impact due to the 2G issue, especially the allocation of spectrum, has already been seen in the marketplace. Players have either left the country or the few residual ones which bought licences—Telenor, Videocon—are in the process of exiting," Mahesh Uppal, director at communications consulting firm ComFirst India, said.

In 2008, during A. Raja’s tenure as telecom minister, 2G spectrum and licences were awarded on a first come, first served basis to operators, at a price discovered in an auction held seven years earlier. Based on a report submitted by the Comptroller and Auditor General of India, which said 2G licences were issued to telecom operators at throwaway prices, causing a presumptive loss of Rs1.76 trillion to the exchequer, the apex court cancelled 122 telecom licences and spectrum allocated in January 2008, holding that the process of allocation was flawed. The court further directed that spectrum or any natural resource must be auctioned.

Apart from dealing a political blow to the then Congress-led United Progressive Alliance (UPA) government, the sector too went into a tailspin. As decision-making ground to a halt, licencees went bankrupt, leading to thousands of jobs being lost. Consumer service quality was also impacted as investment in the sector dried up.

“There will be political impact. It will reopen issues on loss to the exchequer. What is interesting is that the Supreme Court and the CBI judge seem to be looking at this issue in contrasting ways. While the issues are not identical, the spirit of the Supreme Court and the CBI judge seem to be at variance," Uppal added.

Experts believe the sector is unlikely to see any impact from the judgement.

“These kind of judgements keep coming," an official at the department of telecommunications (DoT) said, requesting anonymity. “The government has realised that auction is the best way to allocate a public resource and that will stay," the official added.

But, an interesting takeaway from today could be the prices at which spectrum is auctioned going forward.

“Because the scam crippled the overall system and decision making, the auction prices were never curated. Nobody intervened to correct these prices; they are still very high," an expert said, requesting not to be named. The government needs to take a hard look at the spectrum prices so that the investment by companies can actually go into upgrading networks and not into a bidding war, the expert added.

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