A mammoth telecommunications scandal is rocking India. It's a convoluted and messy affair, involving a far-too-typical mix of corrupt politicians, arrant businesses and smarmy fixers.

After a Comptroller and Auditor General report last month charged that licensing irregularities had cost the government coffers more than $30 billion in lost revenue, telecommunications minister Andimuthu Raja was forced to resign. Raja is now under criminal investigation; the Central Bureau of Investigation raided his home on Thursday.

The opposition has managed to shut down Parliament over the scandal. Issues are so buried in strident rhetoric that it's tempting to dismiss what's going on as just oversized political theater, what Indians call "tamasha."

However, the affair offers a particularly unvarnished and starkly illuminating view of the country's more repugnant business practices -- especially after two magazines ran government-tapped phone conversations of a prominent lobbyist. The scandal shows how much India remains wedded to old-style trappings and manipulation, despite an impressive decade of economic gains. India's notorious "license Raj," with its bureaucratic and political interference, lives on.

The country's two biggest corporate names -- Tata Group and Reliance Industries Ltd. -- are now caught up. So are major foreign investors. On Friday, the government's telecommunications authority threatened to cancel 69 wireless licenses, including ones held by Russian, UAE and Scandinavian joint ventures.

The stakes are huge. India is the world's second-largest mobile telephone market, with approximately 700 million users. One telecom executive last year predicted the country would surpass one billion subscribers by 2015.

The lack of an open, transparent auction of spectrum is at the heart of this mess. In 2007, Raja initiated what is called a "first come, first served" bids approval for second-generation spectrum. He abruptly changed the deadline for bids from Oct. 1, 2007, to Sept. 27, informing favored applicants, but not others, according to the report. The phone conversations of lobbyist Niira Radia, allegedly leaked by the Income Tax Department, offer dramatic evidence that Raja bent his own rules and made exceptions to the deadline through "queue jumping."

The result was two-fold: Bids were artificially low. A number of companies with no background or expertise in wireless obtained valuable spectrum at bargain prices.

That's where the foreign investors come in. With no background in telecommunications, a Mumbai-based realty company called Dynamix Balwas Group, for example, created a brand new telecom subsidiary and paid only 16.51 billion rupees ($366 million) for spectrum. A year later, it sold a 45% stake in its Swan Telecom Pvt. Ltd. subsidiary to Dubai-based Emirates Telecommunications Corp., or Etisalat, for $900 million.

The telecommunications authority has recommended canceling the license of what is now called Etisalat DB Telecom Pvt. Ltd. It also recommended canceling joint ventures involving Russia's AFK Sistema and Scandinavia's Telenor ASA. How this would be accomplished isn't apparent.

The Telenor venture has proven especially problematic. Last year, Telenor paid $1.3 billion for a 67% stake in Unitech Wireless Pvt Ltd., another new wireless entrant owned by a prominent real estate developer. Telenor invested another $633 million in development, which rolled out December 2009. However, with crushing competition depressing prices, the venture is losing hundreds of millions of dollars a year and some Telenor investors are demanding the Norwegian-based company pick up its expensive marbles and go home.

It's all a reminder that while the huge market offers great potential rewards, the risks are very real.