Unitech sells 60% in telecom for Rs 6,120 cr

The great rip-off story in the telecom sector continues. Unitech has divested 60% stake in its telecom arm to Norwegian company Telenor for Rs 6,120 crore. This is nearly four times the Rs 1,658 crore it paid for a 22-circle 2G licence earlier this year. Since the company has not even started to put in place infrastructure for providing telecom services, this consideration is clearly an arbitrage on the licence. Had the spectrum for 2G services been auctioned, this huge upside would have accrued to the government. Last month Swan Telecom had similarly divested stake at a large premium. The telecom minister’s defence of these windfall profits borders on the absurd. He says the government will earn more money from these operators in the form of revenue share. And that he would not have been able to impose a revenue share had spectrum been auctioned. The rush for the limited licences despite the revenue share terms had made it obvious that the 2G licence, with spectrum bundled along with it, was going dirt cheap. And that is precisely why everyone jumped onto the telecom bandwagon, a capital intensive and very competitive business. Even if we buy minister Raja’s argument, what was the harm in conducting the auction? People were queuing up for a pan-India licence at Rs 1,651 crore, the auction-discovered price for fourth telecom operator in 2001. The same could have become the base price in an auction. The government would not have lost a penny. Also, if the revenue share regime is incompatible with auction why does 3G policy demand a revenue-share even when spectrum is to be auctioned? Would Telenor, which now becomes a majority owner in the venture, not pay the revenue share? For Telenor, the acquisition is as good as winning the licence in an auction. What have Unitech and Swan Telecom done to earn crores by diluting their stake in their telecom ventures that don’t even have a tower yet? The finance minister is on record in Parliament that he expects the revenue from 3G auction to help lower the fiscal deficit. The public would like to know, in such times of extreme fiscal slippage, why the government is silent on this huge loss to the exchequer.