Companies & Sectors
Not much joy in spectrum auctions guidelines, says Nomura

Spectrum re-farming is flagged once again and the government has stated that additional spectrum will only be made available after reserving spectrum for re-farming

Nomura Equity Research says that it is hard to see many positives in the spectrum auction guidelines and the only respite would be if the auctions fail altogether, which it thinks is not entirely likely. It recommends avoiding Indian telecoms altogether for now in the equity market.
The Department of Telecom has released the spectrum auction info-memo (information memorandum) providing key details on pricing and the process. The reserve price is Rs140 billion for 5Mhz (on 1800Mhz), and only 10Mhz of spectrum will be initially made available (in 1.25Mhz blocks). The bidding is open to existing operators (they can only bid for 2x1.25Mhz). New players who are eligible for a unified license, and operators whose licenses were recently cancelled, are also eligible and the bidding is open to them as well.
Importantly, spectrum re-farming is flagged once again and the government has stated that additional spectrum will only be made available after reserving spectrum for re-farming.
The deferred payment structure option also exists, which could likely see more competition/operators bidding in the auction, and the spectrum usage charge ranges from 3% to 8%.
Nomura further says that the key items to note in the auction system are as follows:
• Auctions will commence on 12 November 2012 for the 1800Mhz band, and the 800Mhz        
   auctions will commence two days after the completion of the 1800Mhz auctions.
• Competition is likely to be intense, as a minimum eight blocks of 1.25Mhz (10Mhz in    
   total) or about two licenses (for new entrants) will be auctioned in each circle. The    
   existing operators, or companies that are eligible for a unified license, and the operators
   whose licenses were recently cancelled are all eligible to bid in these auctions. The
   existing operators, however, will only be allowed to take a maximum 2x1.25Mhz each  
   (in each circle). 
Nomura says that re-farming is likely to be a key risk for telecom operators. The info-memo makes references to re-farming, suggesting that the government is quite serious about this proposal. Incremental spectrum (over and above 10Mhz) is made available for bidding only after reserving spectrum for re-farming against allocation in the 900 MHz band for licences expiring during 2014 to 2016.
Deferred payment structure also applies whereby the bidders will only have to pay 33% of the amount upfront (for 1800Mhz and 25% for 800Mhz spectrum), and then a two-year moratorium, and then the balance over 10 annual instalments, including interest.
Spectrum usage charge ranges from 3% (for 4.4Mhz) to 8% (for 15.2Mhz).
There are no restrictions on the technology to be adopted for providing services within the scope of the service license.
Moneylife readers may also read “SC asks Government to complete 2G spectrum auction by January 2013” ( for the initial report on the subject.
According to, the efficient use of wireless requires government action in the form of spectrum re-farming, the clearing of frequencies from low-value (by economic and/or social criteria) and reassignment to high-value applications. This is a complex and difficult task in that the occupants of the frequencies to be reassigned are unlikely to be pleased by the change, because of disruptions to their activities.


SEC aims to shut down $600 million Ponzi scheme

The US watchdog, the Securities Exchange Commission, announced its intention to clamp down and virtually shut out a $600 million Ponzi scheme called ZeekRewards. Will our regulators and law enforcers learn?

United States market watchdog, the Securities Exchange Commission (SEC), announced its intention to clamp down and virtually shut out a $600 million Ponzi scheme called ZeekRewards. Such proactive action is rarely taken by the US regulators and law enforcers. Stephen Cohen, an associate director in the SEC’s Division of Enforcement said, “ZeekRewards misused the power of the Internet and lured investors by making them believe they were getting an opportunity to cash in on the next big thing. In reality, their cash was just going to the earlier investor”.


According to the SEC press release, it is believed that Paul Burks, the founder of ZeekRewards, has agreed to settle the SEC’s charges against him without admitting or denying the allegations, and agreed to cooperate with a court-appointed receiver. Burks has agreed to relinquish his interest in the company and its assets plus pay a $4 million penalty. Additionally, the court has appointed a receiver to collect, marshal, manage and distribute remaining assets for return to harmed investors.


The premise of the scheme was to recruit investors or “qualified affiliates”. Qualified affiliates have no role in the organisation except to recruit more helpless individuals and sign up as investors or qualified affiliates”. It is alleged that Burks withdrew approximately $11 million of investors’ (qualified affiliates) money and distributed $1 million to family members. According to SEC’s court complaint, which seeks to shut down the company, ZeekRewards employs a pyramid ‘Matrix’ to reward its investors for recruiting others to join the scheme. The company places each newly recruited affiliate into a “2x5 forced-fill matrix,” which is a multi-level marketing pyramid with 63 positions that pools new investors’ money. Basically, the success of the scheme depends how many people are ‘recruited’. These are the classic makings of the Ponzi and multi-level marketing scheme.


At some point of time, there will be far too many investors, or too few new investors to ‘pay’ the older ones, to sustain the pyramid scheme and is bound to collapse. And this is precisely what SEC thinks will happen. It said in the complaint, “ZeekRewards” current investor payouts are approaching, and may soon exceed, total incoming revenue. In July 2012, total revenue for ZeekRewards was approximately $162 million, while total investor cash pay-outs were approximately $160 million. Further more, it is believed that owners of ZeekRewards hold approximately $225 million in investor funds in approximately 15 financial institutions. These funds are in danger of rapid depletion. What is more pertinent is that vast majority of the funds are being held by payment processors as reserves against potential credit card “charge-backs”.


Ponzi Schemes are nothing new to the world. Their recurrence keeps happening, often right below regulators’ noses, especially in India. We, at Moneylife, had written about it at length and recently over here: ( Will our regulators and law enforcers take notice?


Crime & Money: Biting the bullet of the ballot-3

Crime, power politics and money go together. With the intent to cover up their deeds, criminals enter politics and politicians in power freely use criminals. Crime increases as politicians wield power to take on the law. How will the anti-corruption crusaders-turned-politicians handle this?

Misuse of both money and muscle power is tricky to prove through data analysis. Public outcry against DP Yadav and Amarmani Tripathi only resulted in their kin getting tickets! Laloo handed over the reins to his wife Rabri Devi. Such manipulation makes a mockery of the democratic system. It is no national secret that crime, especially committed with backing of politicians, is grossly under-reported and the issue of black money in politics is too deep. It is what drives Indian politics. One of the steps to deal with this was getting candidates to mandatorily disclose assets and criminal cases. But this is merely the first step. Everyone operates benami accounts and who has ever heard of Income Tax or enforcement officials unearthing undeclared wealth? Does mandatory disclosure of assets achieve the intended purpose? We aggregate the affidavits filed in 2009 by close to 8000 candidates.

(X axis indicates names of states. Y axis indicates average of declared total assets in affidavits for all candidates in that state and with/without crime record separately. Size indicates votes polled in particular state-crime record category. Intensity of colour shows rank of candidate in constituency. Darker means better relative rank.)

A consolidated picture above gives insights into peculiar state-wise differences in role of money and crime. In one view, we explore interplay of multiple factors as mentioned, for all candidates based on their affidavits.

  • • Andhra Pradesh, Gujarat, Karnataka and Uttar Pradesh stand out in gathering high vote-counts and top ranks in respective constituencies, for candidates with higher assets and a criminal record. (All factors on average)
  • • West Bengal is low on the quantum of assets possessed by candidates, in both with/without crime-record categories. Cadre-based affinity to ideology or low state and private sector activity, possibly precludes the impact of big money unlike some other states.
  • • In Tamil Nadu, large number of rich candidates fights elections without success.
  • • In general, power of the gun works. Candidates with criminal records do better in securing top ranks in their constituency.

Next we look at characteristics of only the winning candidates on same graph setting

  • • The role of money in Andhra Pradesh is too stark. Victorious candidates, who also have huge assets declared or have a criminal record, seem to be able to attract large votes.
  • • Haryana, Maharashtra and Punjab also demonstrate correlation between high personal assets and votes polled by winning candidates.
  • • Maharashtra and Jharkhand are only states that show greater number of votes polled by winning candidates with criminal records than other winning candidates in the state. That these states rank high on corruption is no secret.
  • • Karnataka and Uttar Pradesh have higher scale of assets with criminal MPs.

    Key Factor 1: While affidavits reveal little except indicate trends and patterns at the larger level, the role of crime and money is established with distinct patterns in states. Linked with need to have large number of volunteers as mentioned already, candidates will need to plan to both counter and cater to money factor.


    The representative nature of the electoral system has also been under cloud on charges of nepotism. The data analysis of the two mainstream national parties shows distinct patterns. Some painstaking work in collating such work is done by We use that database for below graphic visualization.

    In terms of sheer numbers family background stands out as primary contributor to the Lok Sabha, second only to those who join in without significant political background.  What is also noteworthy is that between the two, Indian National Congress (INC) has significantly greater proportion of members from family background in current parliament. More worrisome, Congress has 22 of 23 youngest MPs with family background in politics. If suitable talent is not available in country then one could have agreed but with huge role of money in elections and other electoral reforms pending and in the overall context of ills plaguing the country, nepotism is serious issue. The indicator also points to growing chasm with Gen Next, who do not find the right people to represent their voices in parliament.

(About the graph: Data related to all MPs from the top two parties in current the Lok Sabha is taken across age (year of birth) and background dimension. The background prior to joining politics is classified into eight prominent categories and based on year of birth, the members of the current Lok Sabha are spread over these eight categories. Intensity of colour in each intersection of DOB and Background is proportional to seats obtained with DARK RED indicating maximum in that row and DARK BLUE the minimum. Base data obtained from site (

The other issue with nepotism relates back to the role of money and crime. If a politician loses, dies or is jailed, the clamour to get a relative in the chair is too stark. It is almost never a public demand but power struggle within the party, with party cadres, beneficiaries of the predecessors’ largesse in government and business all want continuation as does the heir. Bihar during Rabri-Laloo regime, Mulayam-Akhilesh-Dimple in Uttar Pradesh, Andhra after YSR are just few cases in point.

“Winnability” of such privileged candidates and their having come through the electoral route is often used in their defence. This is fallacious logic on the very premise that it acknowledges party failure to build leadership within. But it is real politik that anti-corruption crusaders will have to be alive to.

Key Factor 2: A new entrant sans political background in his/her family, stands better chance of getting a party ticket outside of Congress. Other parties may be shade better. But if not nepotism, they score high on presence of criminals/corrupt businessmen with vested interests.


It is a daunting task for a new entrant to make any headway in today’s politics. Analysts and fans of Team Anna have cautioned them on the pitfalls ahead. This is probably why Kiran Bedi has sided with the BJP. Congress is smug in the belief of having dragged and derailed the movement and is secure in its ability to crack the electoral maths.

The role of in-depth analytics, drilling down to even greater detail to each assembly segment and taluka/tehsil/block or even village and individual voter levels is already established in crafting political divides for end-results. Rahul Gandhi has Kanishka Singh, and Nitin Gadkari has Arun Narendranath, Akhilesh has Abhishek Mishra—Ivy League and IIM grads guiding them to analyse each move on the chess-board where we are pawns.

Beyond the novelty factor of new entrants in politics lies hard leg-work, clever strategy and lots of money to mobilize and hold a minimum number of people. Without key electoral reforms, the dice is heavily loaded against the new political parties, particularly if they have higher moral ground to stick to. Also, same strategies that work for mainstream parties will not work for such new parties. They have the benefit of some excellent brains but at the same time their cadres will need to trust the leadership on matters of strategy, which need to be closed-door to be effective.

 (The purpose of the article is to provide aggregate trends, patterns and analysis. References to any individual names is kept minimal and is not central to the analysis. All raw data used in analysis is sourced from official Election Commission and other GOI websites,,, ADR India and other prominent election data websites. While all attempts to retain data accuracy are made, given the nature of manual data capture from scanned affidavits, missing data, etc, there may be errors in source data. Such inaccuracies can be corrected if brought to notice. )

Sandeep Khurana is Founder and Principal Consultant, QuantLeap Consulting services, based at Hyderabad. An ex-Army officer, he is well-read and experienced in govt and corporate sectors. Sandeep holds a management degree from Indian School of Business. He has interests in social issues, analytics and game theory. He can be reached at [email protected] or his twitter id @IQnEQ.





4 years ago

dear Sandeep, your analysis is bingo. keep it up. but good electoral analyses like these certainly make very disappointing stories. And that's the reason why all the good people keep away from politics. -Abdul


4 years ago

Sandeep Khurana - Even party like BJP with RSS/Jan Sangh ideology we are told there are politicians both elected and party bearers with criminal background. Why BJP is not allowing Parliament to run? If they are not interested to serve the nation(I am usinr their lingo) by electing themselves, let them not contest the election and serve the nation from outside. They want to have the cake and eat it also, want all the perks as elected reps but do not want to do their rightful job. Another problem we are facing is, no major party is getting required majority, have to depend on parties like, SP/BSO/TD/TC/DMK/ADMK etc. who try to extract maximum mileage in such situation. Let God Save India.


Sandeep Khurana

In Reply to GOVIND GOPAL SHANBHAG 4 years ago

Agree with you. Some of the issues you raise on power of small parties, find proof in part 1 and 2 of the analysis. Electoral reforms and cleaning from within by getting elected - is also a chicken and egg situation. But public awareness has undergone sea change in recent times. Its impact on ground needs to be seen in coming elections.

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