Just last month, one of the firms (Swan Telecom), which had paid Rs 1,537 crore for its 13 telecom circles in the country, was able to sell 45 per cent of its equity for $900 million (the enterprise value was therefore $2 billion).
At the going exchange rate, that meant Swan had got a value 5.9 times what it had paid just eight months earlier. Since the Rs 1,537 crore (Rs 15.37 billion) that Swan paid was based on the auction price for the fourth cellular licence way back in June 2001, when there were just four million mobile phone users in the country (today, that number is added every two weeks), it was always obvious that the government would get a much higher price if it auctioned the spectrum.
Since the government got Rs 9,000 crore (Rs 90 billion) from the companies to whom it sold the spectrum last January, using the Swan valuation meant the government had got around Rs 44,100 crore (Rs 441 billion) less than it should have got. But even this valuation, it now appears, may have been an underestimate.
Just a couple of days ago, the real estate firm Unitech, another beneficiary of Mr Raja's largesse, sold a 60 per cent stake in its telecom firm (it applied for all 23 circles and paid Rs1,651 crore as licence fee) to Telenor of Norway.
Since, like Swan, Unitech has not rolled out any of its network and does not have a single subscriber, and since the company has no knowledge of the telecom business, the Rs 6,120 crore paid is only for the spectrum that Unitech got. Including the debt component that will be taken on by Telenor, the company says its enterprise value is now Rs 11,620 crore - that is, Unitech has got a valuation that is more than seven times what it paid.
Given that Telenor has got a majority stake in the firm, which Etisalat did not, the Norwegian firm has naturally paid more. Based on this, the loss to the government is Rs 54,300 crore, or a substantial portion of that (assuming you have to leave something on the table for investors to be attracted). By way of contrast, the entire Bofors contract, and not the 14 per cent commission paid secretly to various middlemen, was worth Rs 1,600 crore, and that was enough to bring down a government two decades ago.
On the flip side, the promoters of the Unitech group (which is the second largest real estate enterprise in the country) have made more money out of grabbing a telecom licence and selling a majority stake in it, than they have done through decades of building their real estate business.
And how were they and the other lucky people chosen to be given spectrum? On the basis of the 'first come, first served' principle that was announced arbitrarily and shut the door on potential applicants, and which then created the equivalent of a rugby scrum to be first through the door, on the appointed morning! Is anyone shocked enough to cry 'Foul!', or has the country ceased to care?
Since this has happened despite Prime Minister Manmohan Singh being against it (at a Ficci function, he stated publicly that auctions were the best way to go), it is clear that he is helpless in the face of coalition politics.
That is, the communications ministry is with the DMK, without whose support the government would not survive; Mr Raja's appointment as the communications minister was first made by Mr Karunanidhi in Chennai, not by the Prime Minister or President; and the DMK and its minister seem to enjoy free rein, with collective Cabinet responsibility being a convenient piece of fiction.
The message to the country is that, if the next government is as beholden to its coalition partners as this one is, crony capitalism will continue to flourish. Indeed, what has just happened in telecom is likely to be repeated when it comes to the impending 3G auctions, from which new players are sought to be excluded. But that will only drop bid prices, because there will be fewer bidders. Any takers for the public interest?
