

India’s telecoms scandal


What a scandal says about government and business in India

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The Supreme Court in India has turned out to be the savior and holder of integrity in the Indian political system. When you take into context this judgement along with the previous judgement in favor of Vodafone (a judgement that went against the Income Tax Department) one thing is clear. Foreign investors can take heart that there is a conscience keeper in the country. Indians hope that this will drive the rest of the system in the right direction. Forget not, that during the Gilded Age the Robber Barons in the US had a field day. It took decades for that country to get things under control. This is not going to be easy. It seems the courts have to fight this menace all the way. One only hopes that the Indian people do not give up the fight.

No Mist

When one stakes all their claims of respectability on somebody's purported "integrity", touting it at every possible chance, that is a sure sign that things are heading the wrong way.

Since 2004 when UPA grabbed New Delhi, it has shouted from every rooftop about the cleanliness of it's Prime Minister, Manmohan. It fooled some Indians till the next election ... but it mostly managed to fool all non-Indians ... from Bush to Obama to Cameroon to Sarkozy all have been taken (or so they claim) by the sagacity of this charlatan called Manmohan. Now it appears that the clock has turned full circle.

Indians as well as non-Indians all know that Manmohan is a deceptive facade for all the murky things going within India. We can safely conclude just one thing -- UPA and Manmohan will be remembered for the death of India story.


A little perspective reset here

1. Last 5 of the 9 governors of the state of Illinois in the US are serving time in prison
2. Bribery is legal in the US (it is called lobbying). About 33% of US senators have family members who are registered as lobbyists.
3. Greek Government Accounting... need I say more
5. Swedish Bofors bribery through Italian Agent... ring a bell anyone?


The Supreme Court judgement will do wonders for India's economy and attractiveness as an investment destination. We were risking becoming a Russia type society where fats cats could buy public assets at throw away prices thru rent seeking behaviour. The judgement serves a notice to corrupt businessmen that they could lose not only the bribes they paid but also the asset they tried to steal if the process in hindsight is found to be blatantly unfair.
Foreign investors such as Telenor have only themselves to blame.
Their were open insinuations that almost eveything in the Telecom Licensing process was amiss...why then did they proceed without doing their due diligence on the integrity of the process or their proposed partners or build safeguards in their agreements with their partners. Foreign investors have prospered in multiple sectors where regulations are clear - banking, Insurance, Consumer Goods, Pharmaceuticals...to name a few. Correction of excesses is a natural part of any capitalist process. India deserves kudos rather than brickbats for her ability to correct a wrong rather than brush it under the carpet.


How is it that a remote villager in India can receive clear incoming calls on a basic Nokia phone for free while Steve Job's $2700 expensive contract "Smart" iPhone drops calls in the middle of Silicon Valley regularly?


Where there is large amount of money "in the flow", unfortunately, there will be some corruption - in all countries. Only in Western countries it is harder to be corrupt and once caught, the consequences can be severe. Corrupt politicians in the West often find that their political careers are over.

What I know of China is that corruption exists but their media can talk about it only after the government accuses the named official(s) of corruption. Their media waits for some 'official nod' before pointing fingers at ONLY those the government has targetted.

Next, I know that many rich mainland Chinese people are investing heavily in real estate - houses, commercial properties, hotels and even golf courses, in almost all WEstern countries. I also understand that many of these super-rich Chinese people are 'well connected'. They have the right 'guanxi'.

The prices of luxury houses in Australia and NewZeland are about 10% higher, as estimated by some real estate agents, because of
demand from mainland Chinese people.

I do not believe that all of them have earned their monies in strictly legal ways.

That term corruption covers a very wide meaning - from exchange of cash to a variety of favours done, from "You pay me X dollars and I will give the 2G Spectrum" to "You play host to me and my family in Switzerland, there is a good chance of you being appointed to this lucrative post" and, so on.

In India, I find that 'brokering' for everything from driving licences to 2G Spectrum licences has become PART OF NATIONAL LIFE. This was not so in the 1960s and not so during British rule of India, although even then Public Workers contracts involved some corruption on the sly. But no direct demands were made as it is now.

From Quottorocchi through Radia to any Regional Transport Office that issues Driving Licences in India, you will find many 'brokers'. Radia's tapes reveal the power of these high level brokers. She was deciding which person, from which party, should get the Telecom Ministry.

That is what corruption is doing to India. It is an addiction that is ruining India - as all addictions ruin individuals. A good man can lose his way through alcohol or drugs. Corruption is the drug by which India's politicians and officials get 'high' and ruin the country. It is interesting that many of them have sent their children to become residents in many foreign countries!!

Anna Hazare and Civil Society should demand that 90% of the properties of corrupt politicians and officials should be CONFISCATED to the nation.

India's politicians will behave only if their personal properties are threatened with confiscation.

Unfortunately, India will never shoot her corrupt politicians and officials as China does often. But their properties should be confiscated - as China's Emperors used to.

Not just the individual politician's properties, but whatever is owned by his wife, all sons, all daughters, all sons-in-laws, drivers, cooks and the whole gang of hangers on.

India's cancer - her politicians and the servile officials who serve them.

Listen to Kautilya's advice -"A just Monarch has to wield the big stick of punishment, he has to aim well and deliver a hard blow after carefully identifying the culprits and after knowing the facts."

CUT THE CANCEROUS FLISH WITHOUT MERCY - so India can live healthy.


Except for Telenor - decent Norwegians caught up unknowingly - all the other players are crooks of first degree - VIDEOCON and the Dhoots being the best example. So, their purported losses are anyways ill gotten.

But corrupt public sector Indian banks will also suffer losses - and to the exchequer - like their exposure to Kingfisher Airlines.


The 2G scam is indicative of, foremost, a medieval arrogance you would associate with absolute rulers, such as Nawabs and 'Maha Rajas' and, second, the attitude 'could -not-care-less' about the country 'we are ruling.. we own it and all the monies owed to it'.

Minhaz Merchant, one of India's perceptive columnists, has stated plainly that the 2G scam has its origin in a political 'understanding' between Sonia Gandhi and Karunanidhi [the leader of the DMK party of Tamil Nadu] that they would 'finance' the 2009 national elections with the stolen monies.

I am disappointed that the Indian National Congress, the oldest political party of India, still ruling India, would stoop to the level of the DMK, who, in my view, are the land-grabbing 'money party' of India with no honesty or sincerity left in them.


Nice article, it highlights the catch 22 situation that investors especially foreign one face in India i.e. do they fore-go the business in growth market or take risks especially in industry where Govt regulations pretty much defines the landscape.

But I take issue with the author's insinuation that SC judgement has created telecom mess where in fact this is going to prove a landmark judgement in ending India's crony capitalism era (at least it would be beginning of end) where now executive would have to ensure that such brazen graft does not happen again, because as India grows in next decade or so there would be many such areas particularly in extractive industries where auction or other fairer and transparent processes will be used hopefully.
And, from consumers point of view it is not too big an issue as out of the 122 licenses 69 were NOT operational (SC has earlier asked Govt to revoke the same) as their owner could not lure a foreign 'bakra' (chump). These 5% mobile phone consumer can easily migrate to other providers thanks to number portability.
The foreign buyers, who bought licenses second hand, should be allowed to participate in upcoming auction but the Indian firms which were involve grantee of 2008 licenses should be debarred and have criminal proceedings initiated and their current stakes/assets be confiscated by Indian Govt.
This definitely marks a new beginning and hopefully Indian Govt would have learnt right lessons so that it may mark the end of India's robber barron era.

PL123 in reply to indica

C'mon! Chinese rich have 'guanxi'!! Give me a break! Indian rich don't have ??
Western politicians are same corrupted as Eastern, but legal. I can't imagine you don't know it. They called "Lobby" !!
OH No, Chinese people push up real estate (and golf-course) price!! I think Australia and New Zealand people like to see this, more prosperity, more money flows. It means business, job, and maintain good living standard. Look at high price Mumbai, the ugliest building there, no one live inside, such a waste. But the rich man have lot of money to waste.
"I do not believe that all of them have earned their monies in strictly legal ways."
BTW all business are dirty, don't do it, stay poor...
Don't dream of this, Chinese Kaiser would have killed your 9 Clan in return, not only confiscated property.
You can't win corruption, just can keep it as small as possible. "C" is a human nature, try to live with it !!

indica in reply to guest-iljomin

Yes, indeed, but a developing country like India is haemmohorraging because of greedy rascals who not merely take the 'cream' but drink up most of the milk, leaving only traces for the rest of the 1.2 Billion Indians.

The USA can afford lobbyists, the Australians can afford to throw a few billion dollars on schemes such as putting 'pink bat' insulation in millions of houses, a lot of which not only did not benefit from the 'insulation' but also caught fire!!

Can India afford the likes of 'Spectrum Raja' and his band of robbers causing the country losses that run into billions of dollars [in rupees in would be trillions]?

Yes, corruption exists everywhere in varying degrees and in various shapes and forms.

The QUESTION IS CAN INDIA AFFORD CORRUPTION? I argue that she cannot - not only in the purely financial sense - but also in the sense of SUBVERSION of India's SPIRITUALITY AND FAIR SENSE.

I argue that India today has only ONE RELIGION - "Money-theism". Rich or poor, all Indians wish to get more MONEY by 'hook or by crook'. Everything good in Indian Culture is, right now, being undermined by MONEY.

God Knows money is needed but what I am saying is that an ancient CULTURE that has discovered higher values of enjoyment in family, social service, social activities that strengthen social bonds and in great music and art, is dropping everything else in favour of MONEY.

Corruption, unashamed corruption, is a sure sign of how much Indian culture is being subverted.


It is not fair to point only at Indian culture. Let us not forget that the whole subprime crisis happened because the most renowned of Rating Agencies gave a very good rating to a collection of subprime loans. One can argue it was a lack of sound judgment but many people smell something fishy.

Coming back to India, yes the system is rotten and the responsibility lies with Congress which has ruled most in past 64 years of independence. The system has been made by them and their ministers and allies have exploited this system well. All political parties might be dirty but this one is dirty till the top. The Bofors scam was first known big scam to involve people in high places and then came 2G the grand father of all big scams, black money debate is still being avoided but I am so hoping to hear from Wikileaks again. Please come back Wikileaks and give out names of Indians politicians, bureaucrats, businessmen and all who have looted this country for ages !!!

vinnystein in reply to anchit

In areas without 3G coverage, 2G will provide conventional voice call services and perhaps some slow data service. In areas where 3G coverage is too weak or becoming weaker to be able to serve an ongoing service satisfactorily, 2G will take over so mobile users won't experience a total disconnect i.e. a call drop in the middle of a conversation. 2G acts as a safety net when co-existing with 3G. It can also help lower the traffic load of a neighbouring 3G site which is experiencing heavy traffic load by helping to carry the services of some of the users in the overlapping area.

But the more critical factor is that the capital and operation expenditure for 3G infrastructure are more costly than 2G's. So in places where operators don't foresee much revenue to justify 3G investment, they will skip 3G and build only 2G base stations e.g. rural areas with little population.

Re India, I would think the operators will probably have covered all the highly populated urban/suburban areas with both 2G & 3G; while large swathes of rural areas and much of the transportation system such as cross-country railway lines/highway with sparse population will most likely be covered with only 2G. Could be off a little bit though.

J. Kemp

"There is also a worrying question: is the smell from the telecoms business a sign of a deeper rot?"

Yes, absolutely.

While it might be the case that at the highest level, India's courts do have the competence and even the willingness to apply the rule of law, the greater problem is the wide-ranging prevalence of a both a profound instinct for, and demonstrable skills in, lawlessness which appear to be so prevalent in the culture of business in India at the ground level.

All of which implies there are good reasons for investors who play be the rules to avoid investing in India, period.


Our cringingly weak Prime Minister, in an effort to please everyone, has brought the country to such a pass. The case shows that political appeasement does not work. Now the foolish man wants to protect the investors, in order to "improve" the investment climate. We are truly living in a banana republic.


@PL123 in reply to indicaFebruary 11th, 12:12

Pl123, leave them alone and there is no sense to argue them about china on indian articles. china may be done in by tomorrow for all I care, but the 'megahurt' here is that india as a single nation is totally hopeless and there is no hope for it.

It’s not because of the corruption or 'guanxi', not its military belligerence, not even its strategic client usefulness to the west.

india's cancer is not ‘her politicians and the servile officials who serve them’.(indica), it’s this massive masturbation of mindset of ‘all’s well’ illusion aphrodisiac among the ‘educated’ and english abled (such as some in this TE group) about india state, and their deafening silence about indian social apartheid of caste and caste generated problems fatal to india.

as one example, I have this one poster response having the audacity to tell me (right on these forums) that india does not have 600 m poor but instead 600m making $3,000 a year. how do you like that. that would put the other 600 m folks making a negative $300 a person a year to justify india’s GDP per cia factbook.


Very appropriate title.Congress can blame itself for this mess in India's most celebrated sector.As famously put by social psychologist Vishvanathan,mobile did to India what automobile had done to America.It changed the way Indians lived their lives.Paradox is ,it also resulted in the biggest scam of independent India.
You are right about buyers of such spurious variety, complaining now to the PM and everyone else.Were they dealing with persons or with a country? If they thought they could deal with those scamsters and bypass the country,why should country be worried about them?
This is a land mark judgement and is putting all those crony capitalists within and without India on notice ,that if they cross certain limits they can end up loosing billions and even can go to jail.Raja and his DMK party very shamelessly maneuvered to get Telecom ministry in 2009.Since then Raja is in jail and DMK has lost elections in Tamilnadu.And now these cronies are running for cover.
India's national emblem carries Sanskrit adage SATYAMEV JAYATE, meaning ULTIMATELY THE TRUTH SHALL WIN.Congress, DMK,Raja and UPA II are bound to find this out before 2014, when they have to face the electorate again.


I don't know much about telecoms.

But, I was just wondering: Are 2G licenses still valuable given that India has now moved to 3G technology?

I am sure, I am being naive. I would appreciate if someone could explain.


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