The Tata Group in India is known for its high standards of corporate governance and ethics.In an environment where Big Business openly colludes with politicians/bureaucrats to blatantly loot and plunder,the Tata Group has stood out for its success and reputation of honesty.While Stock Market Scandals and other Scams happen with great regularity,Tata have generally stayed away from the mess.The Group’s Success in diverse sectors such as Metals (Tata Steel),Automobiles (Tata Motors) ,Software(TCS) have made it the most successful business conglomerate.Audacious acquisitions of overseas companies like Jaguar,Corus,Daewoo have announced the arrival of the Indian MNC.However the recent 2G telecom scam has tarnished this reputation of integrity as Nira  Radia tapes reveal the chairman of the group Ratan Tata of hobnobbing with a shady lobbyist.Ratan Tata has gone to court over breach of privacy but has not explained why his group companies has appointed  an obviously corrupt lobbyist.His Telecom Companies Tata Teleservices and Tata DocoMo were obvious beneficiaries of the adhoc regulation and policy in the last 10 years.A letter from Rajeev Chandrasekharan has in a succinct and factual manner raised questions about the silence of the Tata Group over the last 10 years as the Telecom Shenanigans were being played out.

Indian icons from the military and sports (cricket) have also found themselves falling as they become deeply involved in the myriad scams.The Tata Group is an icon in the Business world  of how to be successful in India while still maintaining high ethical standards.However the Telecom Scam has raised uncomforatable questions about the governance standards of the Tata Group.Its time for the Tatas to stand upto the legacy otherwise the royalty charged by the Tata Group from its companies for the use of the Tata Brand Name will become another instance of fleecing the minority investors.

What Rajeev Chandrashekhar told Ratan Tata

I, as countless other Indians, have held the house of Tatas in great esteem and respect – have seen them as being different from so many other Indian corporates that play by a different set of rules and values. I, along with many Indians, consider JRD Tata as one of the true builders of modern India.

So, it is with considerable sadness and dismay that I am constrained to write this open letter to you. I trust you will not consider this as personal, since my letter has to do with issues of principle and conduct that are disturbing.

In your recent press interactions, you have made the point that the 2G scam needs to be investigated and have made several sub-points, including:

1) Out-of-turn allocation of spectrum;

2) Hoarding of spectrum by incumbent operators; and

3) Flip-flop of Policy

Let me wholeheartedly agree with you. Many in media and public life including me, have been saying this for several years now, so your belated realization of these critical issues is very welcome.

I sympathize with your concern about public-policy making in our country sometimes resembling that of a Banana Republic. But the forces behind this are helped considerably by the fact that people with power and influence remain silent and passive spectators to this. So many including I would have welcomed your intervention much earlier, as in the case of the alleged bribing offer 15 years ago, of Rs 15 Crores that you referred to only recently.

You will agree that speaking out against corruption is most effective when it is happening and not decades or years later. Because then it becomes an intellectual post mortem, and not active resistance.

Since I was previously a telecom entrepreneur, there will be a temptation for those that advise you, to attribute agenda and motivations to this letter of mine. But I assure you that there is none. I write because I believe that there is a need to join you in this debate and necessarily bring to your attention the contradictions between your stand and the position of the Tata Telecom companies, that you may be unaware of, given your senior position in your organization.

1) Out-of-Turn Allocation of Spectrum

According to the CAG Report, the potential loss to the Exchequer on account of dual technology licenses at 3G rates is Rs. 37,154 crores. By virtue of dual technology – according to the CAG – your company has caused a loss to the Exchequer to the tune of approx. Rs. 19074.8 crores.

But it is not just this. It is a fact that the Tata Group is a beneficiary of out-of-turn spectrum. In fact, one of the biggest of them all.

It is a fact admitted by the Government on affidavit that 575 applications were received for 2G spectrum by 01 October, 2007. Using an illegal and arbitrary cutoff date, Mr. Raja processed only 122 applications received till 25 September, 2007. 110 were rejected and 343 applications were put in abeyance.

Given the fact that there is no 2G spectrum available, these applications received till 01 October, 2007 (within the date represented by the Government) have now been put in the dustbin. In fact, the TRAI had already recommended on 11 May 2010 that no more UASL license with bundled spectrum can be given. This means that these 343 applications will never be processed and will never see spectrum.

In the meantime, 19 days after these 575 applications were received, the dual technology policy was announced through a press release by Mr. Raja. The Tatas put in their dual technology applications around 22 October. So, in effect, their application went in three weeks after the 575 2G applications were received.

Today, Tatas already have GSM spectrum allocated and GSM service launched in most of the circles – But the 343 applications submitted three weeks before the Tata Group have neither been processed nor have any chance of ever being processed – so much for First Come, First Serve.

You will accept that this seems to be a case of arriving late, forming a new queue, jumping the priority and accusing others of getting priority on spectrum allocation and meets your point of out-of-turn allocation of spectrum. I am sure the 373 applicants who were rejected for no fault of theirs, will agree – while the Tata Group has sold its equity for billions of dollars to NTT Docomo based on its out-of-turn GSM allocation on dual technology policy.

In my humble opinion, evidence suggests that the Tatas have benefited from out-of-turn spectrum allocation. The dispute between Tatas and Reliance Comm inter se on the allocation sequence cannot dilute the primary fact of bypassing other early applicants to this spectrum.

2) Hoarding of spectrum by incumbent operators

This is an important point you have raised. I concur with you that there is a need for Telcos, old or new, to pay market rates for spectrum. I also completely agree that the subscriber linked criteria allocation of spectrum is flawed and is encouraging fudging and false subscriber numbers. But I bring to your attention, that this is existing Government policy – flawed or unfortunate as it may be, and the only solution to this is to replace this with a new policy.

If by hoarding, you mean having more spectrum than number of subscribers that can be serviced – then please note that Tata holds spectrum both for GSM and CDMA. Based on the spectrum that Tata has, its average efficiency is perhaps the lowest amongst the large operators. Equally, that the CDMA spectrum that Tata holds is 3-4 times more efficient than the GSM operators – by its own admission, which I recall during the WLL scam.

Moreover, Tata has received CDMA and GSM spectrum at 2001 rates. So even if the hoarding charge was to apply, it would also apply to the Tatas for having maximum cumulative efficiency (CDMA and GSM) to serve the least number of subscribers amongst the incumbents.

Again, I fully support the need to price spectrum beyond 6.2 MHz with incumbent operators at market rates. But the charge of hoarding that you make applies equally to Tata Tele – whether it is total spectrum held, or subscribers served based on that spectrum, or price paid to acquire such spectrum, vis-à-vis the cumulative efficiency of CDMA and GSM.

3) Flip-flop of Policy

In your interview, you have pointed out that a lot of the current dysfunctionality in Telecom has arisen from Policy changes and flip-flops. You would recall that one of the most horrific distortions of Policy was the infamous WLL scam in 2001– where Telecom companies with Fixed service licenses managed to muscle their way into cellular with active support of Policy makers of that time – and not to forget that it was all done in the name of benefit to the common man! You will further recall that in 2003, a convenient set of recommendations by the TRAI and Government allowed this illegality to be regularized through the UASL policy, opening the gates to unprecedented and unique (and unheard of) First Come, First Served form of licensing – bypassing tenders (a form of auction) that were the norm for obtaining cellular licenses till then.

Your company was the beneficiary of this ‘policy flip-flop’ and you chose to accept the benefits of this flip-flop at that time – despite this blatant violation and distortion. I am personally aware because I led the fight against it and remember being immensely disappointed at the Tata Group’s remarkably self-serving position. Further, in one of the most mysterious and indefensible acts, Tata Group took on board as a consultant, the very individual, who as the Chairman of TRAI was the architect of this UASL and other shames.

So in summary and respectfully, your positions in the recent interviews seem to be in stark contrast with the actual conduct, performance and position of Tatas’ Telecom companies in each of the three points you have raised.

There are several other questions that deserve answers, including why a group like Tata with its sterling character and reputation requires outside lobbyists to lobby on their behalf! That, in itself, is enough to shatter one’s confidence!

I reiterate that this letter is not meant to tarnish or disrespect or distract from the many achievements of the Tata Group including the acquisition of International Brands like Land Rover, Jaguar and its increasingly global footprint. But I believe, on behalf of many erstwhile supporters of the Tata group, that it is my duty to seek and spotlight the truth. The Tata Group has a responsibility, and indeed, owes it to its many admirers in India to actually live up to its image of ethical conduct, otherwise your statements and actions will seem to be hypocrisy – something that’s already available in plenty in our public and corporate life.


Rajeev Chandrasekhar

Member of Parliament

New Delhi

06 December, 2010

Corruption Scandals have rocked India in recent times with top politicians,bureaucrats,generals accused of billion dollar scams.The Commonwealth Games,Adarsh Housing Land and the Mining Scams have implicated ruling politicians from both the national level parties in India.India’s Bureaucracy has been found to be equal partners in the wholesale corruption that is taking place.With the growing public opinion against these scams,India’s Ruling Congress Party has reluctantly fired the culpable leaders.However there are no signs of prosecution or jail time as the offenders are too powerful to be jailed despite the blatant corruption.The Generals and the Politicians have reportedly returned their ill gotten gains as if returning a knife committed for murder should absolve one of the crime of killing.

Now it has come to light that one of India’s Leading Bureaucrats sold sensitive details related to Telecom Security to private firms in return for sex and money.Through an elaborate web of  codes and multiple mobile phones,this IAS officer used to sell security information related to India’s recent telecom security to leading telecom firms.Note India had recently taken stringent action against  RIMM(  Blackberry maker) and some others for failing to provide security codes.It was an opaque regulatory action ripe for bribes and corruption which was taken advantage by Ravi Inder Singh, the Director in the Union Ministry of Home Affairs (MHA).Note it is openly known that nothing moves through the central ministry without bribing the corrupt officials manning those offices.Powerful Business Houses have most of these bureaucrats on their illegal payrolls as most policies are known much before by bigger corporates before they become policy.The expose done in the magazine “outlook” clearly demonstrates how India’s powerful minsisterships and policy decisions are sold in closed rooms in the capital.Investors should be careful about investing in Indian companies as  regulatory/corruption risk remains high as the SKS Microfinance and Unitech/Videocon stock falls show

MHA officer in custody; Chinese firms may have picked up info he leaked – IE

In what is turning out to be a case of industrial espionage, investigators believe Ravi Inder Singh, the Director in the Union Ministry of Home Affairs (MHA) who was detained by the Delhi Police on Monday, could have been leaking information to telecom companies through an acquaintance called Vineet. Sources said some of the information made available by the 1994-batch West Bengal cadre IAS officer to Vineet — who runs a food processing unit in Bengal — could have been accessed by Chinese companies doing business in India.

The Government of India has formed a high powered panel to look into replacing the usage of diesel powered gensets by Renewable Energy in Telecom Towers.India has  around 300,000 Telecom Towers most of which are powered by expensive  diesel generators.The reason is that a lot of the telecom towers are situated in far flung areas where the grid does not exist.Also the power supply in India is erratic and not reliable with 10 hour electricity blackouts not an infrequent occurrence.In these cases a backup supply of electricity supply is badly needed.Diesel Generators are the most popular form with Diesel heavily subsidized by the government in comparison to normal petroleum.Also Diesel Generators are widely available without huge capital costs.

However these Diesel Generators are much more expensive than normal electricity and cause a huge amount of pollution.The government estimates a $1.5 billion annual spend on fossil fuel by telecom towers with 5 million tons of Carbon Dioxide Emission.Replacing these polluting forms of expensive dirty energy with Green Energy is a great forward looking proactive step.Note some of the telecom towers are already using some form of Renewable Energy.Making it mandatory for all towers to use Green Energy would give the much needed policy boost to Green Telecom in India.

Renewable Energy For Telecom Towers: Panel Formed – RTT

The Union Government has set up a five-member committee, headed by Ajay Bhattacharya of the Universal Service Obligation Fund (USOF) of the Telecom Ministry, to explore ways to promote renewable energy for powering telecom towers, say media reports. Every year, the country’s three-lakh telecom towers utilize fuel worth over Rs.6,400 crore. The government is planning to use renewable energy, particularly solar energy, to reduce the cost of fuel and to dispense with hazardous carbon emissions. The committee will submit its report in three months.

The Indian Government had blacklisted Huawei and ZTE earlier this year on Security Concerns.These Firms were said to have close relations with the Chinese Government and Intelligence Agencies had raised a red flag about potential security breaches in critical communication infrastructure.This had led to a lot of  to and fro with Telecom Operators and Chinese Government lobbying the Government to allow the Chinese Equipment Vendors.The Indian Government in its typical opaque and convoluted manner kept things meandering.There were reports that the Government would put the onus of security on Telecom Operators and put huge fines in case of Trojans found in the Software.Huawei and ZTE also tried placating the government through various ploys like Chinese employees keeping Indian names.Given the importance of the Indian market Huawei and ZTE are willing to keep the source code in Indian custody while Western Vendors have balked at the move.It remains questionable over why Chinese vendors are willing to give away such valuable IP where Western players remain reluctant.

India clears ZTE, Huawei gear – TelecomAsia

India got the wheels moving on imports of Chinese infrastructure last week, clearing carriers Reliance and Tata Teleservices to bring in equipment from ZTE and Huawei.The government opened the door after the Chinese vendors agreed to supply codes allowing India’s security forces to access encrypted data sent via their networks, to allay fears the gear could be riddled with malware reports.Negotiators from ZTE and Tata agreed in principal with India’s requirement that network source code be made available to authorities in a ‘sealed envelope’ escrow account, reported.

Does allowing Huawei make sense given increasing Sino-Indian Tensions

The Indian Government has never been known to play the economic cards to its advantage.India and Chinese relations have come under increasing strains with Indian PM raising concerns about China’s  territorial ambitions in South Asia.Despite all the needling,India’s Corporate Lobbies have won out as usual with Tata Teleservices giving the contract for 3G equipment to Huawei with government approval.Huawei has faced a lot of obstacles from US and other countries due to its close PLA links.It was blocked from buying Motorola’s unit as well as 3Com.Note India’s proposal to put duties on import of power equipment from China is also hanging fire.India’s voracious private corporate  groups care a fig leaf for India’s Secrutiy in their quest for profits.These Corporates are a Stronger Lobby than the Chinese Government for the Chinese companies.

Tata Tele signs pact with Huawei for 3G rollout – Hindu

Tata Teleservices Ltd. (TTSL) on Thursday said Huawei of China would provide its next-generation telecommunications network solutions to help rollout its 3G network in India.

TTSL, which recently acquired 3G spectrum for nine circles, has selected Huawei to implement a robust and rapid rollout in five circles. It will enable the telecom operator to offer superior multi-media voice and data services such as mobile streaming, video calls, mobile internet and other 3G services to its customers, a company statement said.

TTSL has selected Huawei’s 3G technology under the managed services model, which includes the installation of thousands of Huawei’s industry leading, LTE—ready, SingleRAN 4th generation multi standard radios (MSR).

Huawei faces blacklisting from India on Security Concerns

Huawei has been blacklisted by the Indian government from supplying telecom equipment due to security concerns.Despite strong lobbying by the Chinese government and Indian telecom operators,Chinese telecom equipment firms have been effectively frozen out of the world’s fastest growing telecom market.Huawei has also faced push-back from the US government which has blocked Huawei from acquiring US telecom companies.Huawei failed to win over 3Com when the company was sold as it failed to get regulatory approvals from US authorities

Huawei’s PLA links leads to failure in acquiring US Technology Assets

Huawie’s origins which are closely linked with the Chinese Army (PLA) makes it a natural suspect.Telecom equipment is a now crucial security component of a country’s infrastructure.No one wants a foreign firm with links to that country’s army to be involved in building such critical communication components.Huawei has been criticized over stealing Intellectual Property (IP) and Piracy with Motorola recently filing a case against the company.Huawei has become one of the leading telecom equipment suppliers in the world from being a non-entity a decade ago.Telecom Equipment Industry has high entry barriers because of the technology and capex required.This makes both Huawei and ZTE suspetible to claims of stealing technology from foreign firms like Nokia-Siemens,Motorola and Alcatel.Its not a big surprise then that US government is blocking Huawei from acquiring critical technology assets in the USA.It has been reported that Huawei has failed in acquiring 2Wire and Motorola’s wireless equipment unit despite bidding $100 million higher than competing offers.The Huawei bid failed because of the uncertainty over US government approvals.Morgan Stanley has been hired by Huawei to acquire US technology assets but success has proved to be elusive.

Huawei Said to Have Failed in U.S. Takeover Bids – Businessweek

Huawei Technologies Co. failed to reach agreements to buy two U.S. assets last month, even though the Chinese phone-equipment maker offered at least $100 million more in each case, according to two people with knowledge of the matter.

The sellers doubted Huawei’s ability to win U.S. government approval to purchase software supplier 2Wire Inc. and Motorola Inc.’s wireless-equipment unit, the people said. They declined to be identified because Huawei’s offers weren’t public.

Huawei, founded by former Chinese army official Ren Zhengfei, failed in its latest attempts to expand in the U.S. where the Shenzhen, southern China-based company had encountered opposition based on national security concerns. In 2008, Huawei dropped a bid for computer-equipment maker 3Com Corp. after the U.S. began investigating whether a deal would give China access to anti-hacking technology used by the Defense Department.“There is still some skepticism in the U.S. about any potential sale of technology assets to a Chinese company,” Wilson Chai, an analyst at Mirae Asset Securities in Hong Kong, said by phone today. “After years of trying in the U.S., Huawei hasn’t made any significant breakthroughs in that market.”

Huawei hired Morgan Stanley in its attempts to purchase a U.S. asset, the people said. The Chinese company was also assisted by law firms such as Sullivan & Cromwell LLP and Skadden, Arps, Slate, Meagher & Flom LLP, according to the people.

Huawei and ZTE in the center of the storm

Huawei and ZTE have been embroiled in a major controversy over India’s security concerns over using Chinese equipment in the sensitive communication industry.India is the fastest growing telecom market in the world and as result the most attractive one as well.Huawei and ZTE,the two huge Chinese telecom equipment behemoths have garnered a big chunk of the marketshare in India due to their lower priced equipment compared to Western competitors like Alcatel,Nokia and Ericsson.However tensions between India and China have always remained high since the 1962 war.The recent Chinese obstacles for India’s Nuclear Energy plans using Pakistan as a proxy and other anti-India policies have done nothing to improve the relations between the 2 countries.This caused India to virtually ban Huawei and ZTE from India’s lucrative telecom market.ZTE and Huawei ever since have been desperately lobbying to overturn this ban through various measure like  by changing the names of  Chinese employees to sound Indian and using  Indian telecom customers and Chinese trade associations to lobby on their behalf.

China is a master of protectionist policies

The latest report in Indian media that Indian regulation for purchase of telecom equipment has allegedly blacklisted 25 Chinese firms have raised the hackles of the Chinese commerce minister.The Chinese government has voiced concerns over these developments asking for a fair and transparent system so that its companies can compete.Fairly hypocritical in my view considering the huge implicit and explicit subsidies given by the Chinese government to its industries.Also China is a past master in protectionist policies as well with GE’s CEO recently criticizing China over discrimination of foreign companies

Chinese telecom suppliers blacklisted in India – PeopleDaily

It could be said that Chinese telecom enterprises have strong competitiveness in the Indian market and come to be recognized. Nevertheless, Chinese telecom enterprises have suffered heavy setbacks and gained nothing in the Indian market over recent months resulting from the initial ban to the security review and blacklist.Some Indian industry insiders doubt the setbacks of Chinese telecommunications equipment makers were due to the trouble created by interests groups.

Analysts pointed out that the timing of ban was just before the upcoming issuance of 3G licenses in India, so it is nothing more than an attempt to shut Chinese telecom enterprises out of the first round of competition for India’s 3G market through delays. The disclosure of the blacklist by the Indian media was perhaps due to moves by India’s telecom operators, such as Tata and Reliance, to pressure their government to solve the Internet security review issue as soon as possible.

Analysts believe that if the Indian government does shut out Chinese telecom companies, the main beneficiaries would be European and American telecom companies rather than India itself. Chinese companies provide products that have the same high quality as their counterparts from Europe and America but with lower prices, and it is evident that the Indian people will benefit much from the cooperation between China and India.

China voices concern over India ‘blacklisting’ telecom firms – Economic Times

Voicing its concern over reports that its telecom companies have been blacklisted by India, China on Friday asked New Delhi to treat its firms fairly and called for an open and transparent system for them to operate in. “We have noticed the list and are making an investigation. We hope India will provide a fair, open and transparent investment environment for Chinese companies,” Chinese Minister of Commerce Chen Deming said on Friday. He was referring to reports that appeared in a section of the Indian media, which stated that some Chinese companies were being blacklisted by the Indian government. The list includes 25 Chinese vendors, including Huawei and ZTE, official Xinhua newsagency reported. “We will investigate through normal channels between the two governments, and communicate and negotiate with the Indian side after making the facts clear,” Chen said.