20k ? 60k ? or is it 176k crores ?

[Clarke]

The Congress may be in overdrive cleaning its own house, but its ally the DMK, and in particular IT Minister A Raja, continue to cause the UPA government huge embarrassment. A day after NDTV reported that the Comptroller and Auditor General (CAG) had found that the 2G spectrum auction caused the government losses of around Rs. 1.76 lakh crore, more details are emerging about what the damning report says. Slamming A Raja, the CAG report says, "The Honourable Minister of Communication & IT, for no apparent logical or valid reasons, ignored the advice of Ministry of Law and Ministry of Finance, avoided the deliberations of the Telecom Commission to allocate 2G spectrum, a scarce finite national asset at less than its true value on flexible criteria and procedures adopted to benefit a few operators." In its severe indictment, the CAG report says: The Department of Telecom did not follow its own guidelines on eligibility conditions. It arbitrarily changed the cut-off date for applications after the original cut-off date. It altered conditions of the First Come First Served procedure It gave unfair advantage to certain companies over others. It created an environment not "transparent and fair." It issued new licences for 2G spectrum at 2001 prices in 2008. It flouted all rules, procedures to be followed in a parliamentary democratic set-up. This figure of 1.76 lakh crores comes right after the Adarsh Housing Society scam. Jai Hoooooooo Kangress & UPA sarkar :yay:

[achilles]

A.Raja was caught in a sting operation even by Headlines Today. He is still the Minister.

[Sir john]

congress in big rouble. next time NDA will win and forum government.

[kabira]

^LOL, well our ppl are not that smart Rahul Gandhi will be next CM. The telecom ministry always been money making ministry. From Sukhram to Raja everyone made money, even Late Pramod Mahajan

[bharathh]

Which industry is not money making? :( They make money off widows, off cows.. pretty much anything and everything in India.

[Ram]

1.76 lakh crores? That’s about $40 Billion. Am I missing something here? I don’t think the combined annual profits of all Indian companies put together will cross $2.5 Billion. So is the CAG estimating that the telecom companies would have paid their 5-10 times (projected) annual profits, just for for 2G licenses?

[Clarke]

1.76 lakh crores? That’s about $40 Billion. Am I missing something here? I don’t think the combined annual profits of all Indian companies put together will cross $2.5 Billion. So is the CAG estimating that the telecom companies would have paid their 5-10 times (projected) annual profits' date=' just for for 2G licenses?[/quote'] I did have doubts on the latest figure but only an expert with considerable insider knowledge can shed light on whether the number is a wild exaggeration or not. The govt made 60k-70k crores from the 3G auction. That's some kind of a starting point since 2G was really hot in those days.

[f2000560]

1.76 lakh crores? That’s about $40 Billion. Am I missing something here? I don’t think the combined annual profits of all Indian companies put together will cross $2.5 Billion. So is the CAG estimating that the telecom companies would have paid their 5-10 times (projected) annual profits' date=' just for for 2G licenses?[/quote'] i don't see why thats so difficult to fathom? companies specially telecom trade at such high PE ratio's. i think the valuation is not out of the realm of plausibility. That being said its easier to estimate today the value of the 2g licenses then given info then on that day. Whatever the case DMK has perhaps one of the the worst performing ministers and the party is flush with cash ! anyways give me some time will try to value the spectrum and see if the figure is plausible or not.

[Ram]

i don't see why thats so difficult to fathom? companies specially telecom trade at such high PE ratio's. i think the valuation is not out of the realm of plausibility. That being said its easier to estimate today the value of the 2g licenses then given info then on that day. Whatever the case DMK has perhaps one of the the worst performing ministers and the party is flush with cash ! anyways give me some time will try to value the spectrum and see if the figure is plausible or not.

Please do. Also post the methodology of calculations that you used to come up with the number. But just looking at it from the outside, it does seem a bit ludicrous that the telecom companies would pay anywhere b/w 8-15 times their combined annual revenue, just for getting 2G licenses. And oh btw, I have no doubts whatsoever that 10s, if not 100s of crores changed hands underneath the table in this telecom license thingy. DMK has been one of the biggest scum of the earth and will continue to do so.

[asterix]

A Raja resigns..DMK finally blinks...

[Sir john]

raja resigns at the end.:--D

[Ram]

A Raja resigns..DMK finally blinks...

Whats the use? The money that was swindled isn’t coming back any soon. There might be a criminal case that will drag on years and that will ultimately lead to no conviction. The price to pay for corruption is not resignation, but conviction. Btw, the 3G license sale in India fetched the govt. $15 bn even though it went through mandated auctioning process, but if you believe the report in the OP, the CAG is estimating that the govt. lost nearly $45 bn in giving the 2G licenses. I find it scarcely believable that the 2G licenses are worth nearly 4 times the value of 3G licenses, keeping in mind that 3G is probably a lot more profitable than 3G and hence the operators would probably pay more for it.

[Clarke]

MM, u sure that 3G is more profitable than 2G in the Indian context ? The high speed data services will be used by less than 10% (maybe 2-5%) of the population while the penetration of 2G (digital telephony based voice calls and sms) must be greater than half the population. 75% of the country lives on less than $2 a day and yet many of them are able to use a cellphone. The enhanced services such as GPRS & EDGE must also fall under the 2G spectrum if i am not wrong ..

[Ram]

MM, u sure that 3G is more profitable than 2G in the Indian context ? The high speed data services will be used by less than 10% (maybe 2-5%) of the population while the penetration of 2G (digital telephony based voice calls and sms) must be greater than half the population. 75% of the country lives on less than $2 a day and yet many of them are able to use a cellphone. The enhanced services such as GPRS & EDGE must also fall under the 2G spectrum if i am not wrong ..

You cannot look at it from such a broad perspective. The way the Indian telecom market is structured, it is currently one of the least profitable markets in the world, if you consider the revenue/consumer number. We have about 400 million phone users in India, but the combined profits of our telecom companies last year was around $2.5 bn (The number might be off by a few 100 million here and there). That’s revenue/consumer ratio of around $6, which is almost certainly, the lowest in the world. That is because even though our telecom companies have a vast consumer base, most of them actually contribute very little, if nothing at all to their profitability. If anything, I am willing to bet that a significant portion of the consumer actually lose money for the companies. 90% of the profitability of telecom companies probably come from the top 10% of the consumers, the ones with the highest voice and data usage. 3G is targeted at them, not the rest 90%. My guess would be that 3g services would enable telecom companies to double, if not triple their profits.

[f2000560]

MM i still have to get back on the valuation but a good place to start would be the valuations at which sistema and telenor bought stakes at companies which had little else but the license to give you a fair idea what the valuation of the licenses could be. ARPU's have been falling from nearly 550 plus to around the 300 mark which corresponds to the $6 you mentioned primarily because of the price war. further lack of profitability is to a large extant due to high costs of acquiring clients and retaining them and not due to the high cost of providing service (i.e. the variable costs of an sms still approach zero)

[Ram]

MM i still have to get back on the valuation but a good place to start would be the valuations at which sistema and telenor bought stakes at companies which had little else but the license to give you a fair idea what the valuation of the licenses could be.

I am still not sure why you keep bringing up the issue of stock price here, especially when we are discussing the license fees. Foreign companies buy stakes in Indian companies not just because it is the fastest growing telecom market in the world and one you simply cannot miss, but also due to the prospects of future profitability. Plus, foreign companies buy stakes in Indian companies all the time, in all sorts of sectors and not all those sectors involve govt. licenses.

ARPU's have been falling from nearly 550 plus to around the 300 mark which corresponds to the $6 you mentioned primarily because of the price war. further lack of profitability is to a large extant due to high costs of acquiring clients and retaining them and not due to the high cost of providing service (i.e. the variable costs of an sms still approach zero)

Oh there are plenty of reasons why the ARPU is so low in India, but I bought that point up in response to Clarkey’s statement that 3G may not be that profitable for telecom companies since a vast majority of Indian consumers wont even use it. My reply was - That is true, but that same vast majority of the consumers don’t contribute to the profits of telecom companies even today. Most of the profits come from corporate and top 10% of customers and it is these people who are going to use 3G anyway.

[cowboysfan]

i dont trust any politicians from tamil nadu.Congres better win more seats next election and dump these idiots or have a better leash on them.

[Desi Cartman]

Why blame these ministers only when its crystal clear that Sonia jee and Congress party get share of each and every bribe paid to anyone in the ministry. I have heard stories from someone ( very close family friend ) where Sheila dikshit asked for bribe and said "we have to pay 2/3 to high command" apparently there are shares for Congress, Sonia Gandhi and at times even for priyanka ( especially for settling land disputes in Delhi ). Now why blame Kalmadis and these useless Ministers only

[Nova]

I just read that Ratan Tata was asked to bribe a Union Minister 15 crores some 10-12 years ago, to form a private domestic airline. Everyone is corrupt. Gaaandu saale!

[f2000560]

I am still not sure why you keep bringing up the issue of stock price here, especially when we are discussing the license fees. Foreign companies buy stakes in Indian companies not just because it is the fastest growing telecom market in the world and one you simply cannot miss, but also due to the prospects of future profitability. Plus, foreign companies buy stakes in Indian companies all the time, in all sorts of sectors and not all those sectors involve govt. licenses.

I think this has everything to do with the mis pricing of the auction. Please bear in mind that the foreign companies acquired stake in the indian firms who had no real asset, no cash, no existing user base or cashflows until then. In essence they bought a stake in a company that had nothing else no history of profits but the license ( which in this case is essential for future profits) and therefore they have basically valued the license. to put simply stock price or value of a company is merely the present value of all profits accruing to it for eternity ( atleast in theory) . in this case the only value in these companies was the license. and lets not lose sight of the fact that market pricing in perhaps the best mechanism compared to firs come first serve to ascertain the true valeu of the license. just saying If i was to buy a piece of land from you at say Rs X and then almost immediately without doing value addition sell quarter of it for for Rs 4X would you feel you have been hard done by me ? just asking. which is simply what has happened in this case. that being said the current figure does seem large but no doubt a humongous sum has been stolen from the government