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Indian 2G scandal makes shockwaves as authorities come down on licence holders

The Indian 2G licensing scandal that resulted in the resignation of the country’s telecoms minister Andimuthu Raja will has seized the attention of several government ministers and regulators, who have declared their intention to punish those involved.

Speaking to the Financial Times, junior telecoms minister Sachin Pilot stated: “Actions will be taken against any operator who does not meet our telecom regulation and [failed to complete a] full rollout of services.” Therefore, the companies that won the licences in 2008 could be forced to return them.

The telecoms ministry has already been requested by the Telecom Regulatory Authority of India (TRAI) to annul 62 regional licences that were issued in 2008. Originally distributed among five companies, some of the licences are now owned by major international operators, including Telenor and Etisalat.

Having incurred significant backlash for letting the issue slide, prime minister Manmohan Singh has made clear that he shares TRAI’s zero-tolerance attitude, stating: “If any wrong thing has been done by anybody, he or she will be brought to book.”

The rates for the 2G licences sold in 2008 were reportedly massively undervalued – which, coupled with the fact that they were sold on a 'first come, first served’ basis rather than via a competitive auction, is thought to have lost India revenue worth around US$40 billion.

There potential consequences of this scandal could have far-reaching effects on parties that are theoretically uninvolved, such as new operators breaking into the Indian market. For example Uninor, a subsidiary of the Norwegian Telenor, could be stung by the fact that its partner in a US$1.1 billion joint venture – local operator Unitech – already held its licence at the time that the transaction took place.

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