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Spectrum auction: More legal tangles await govt

GSM operators brace up to challenge EGoM's decisions in court

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Even as the auction of 2g spectrum –which has met with a lackluster response-, begins today, the Government is confronted with the specter of a series of legal challenges from telcos-which could lead to another phase of uncertainty in the telecom sector.

On the surface the Empowered group of ministers on telecom and the cabinet in the last few months took some key decisions which seem to have resolved all contentious issues. It pushed through refarming of spectrum in the 900 MHz band to 1800 MHz, allowing incumbent operators to keep only 2.5 MHz. Two, it imposed one time spectrum charges on incumbent GSM operators for spectrum that they hold beyond 4.4 MHz and 2.5 MHz for CDMA players. It also fixed the base  price (Rs 14,000 crore for 5MHZ in 1800 MHz ) for auction and the quantum of the cancelled spectrum due to the Supreme court order spectrum which would  be auctioned.

However, GSM operators are bracing up to challenge at least two of these decisions in court. Says Rajan Matthews director general of Cellular Operators Association of India (COAI): “The choice is clear, either the government rectifies its decisions or everything will have to go to the courts leading to months of uncertainty. The choice is with the Government”. 

COAI says they will challenge refarming in the court because under their contract licences were supposed to be extended not renewed as the government now says. So it cannot change the conditions of the licence by forcing them to give back part of the 900 Mhz spectrum. “It can bilaterally sit with us and fix a new price for extension but not change the conditions of the licence unilaterally.   So we have no choice but to challenge it in court,” adds Matthews      

CDMA operators are also readying to challenge the decision of the Government asking them to pay one time spectrum charges prospectively. Says Ashok Sud secretary general of AUSPI which represents dual technology players: “It is very clear to us that our contracted spectrum is up to 5 MHz. We have taken opinion of legal luminaries and they have supported out view. So it would not be fair to assume that our members would look at legal option”.

Even COAI is mulling to challenge the same decision. They argue that even spectrum beyond 6.2 MHz was given to the government based on a transparent policy so there is no reason to pay one-time fee.  “The government had two choices – to impose one time spectrum charges or increase revenue share and this is documented . They chose the latter. And the TRAI has said that they cannot now also charge one time spectrum charges”.     

Thirdly, the Supreme Court’s last week asked the government to explain why the entire spectrum available after the cancellation of licences had not been put up for the upcoming 2g auction.  It was hearing a petition filed by COAI and some operators.

Experts say that the entire refarming process is pegged to a final decision on this issue. “If all spectrum( out of 471 MHz only 271 MHz is up for auction )   has to come up for auction now it would  mean the death of refarming as there will be no spectrum available for refarming from 900 MhZ to 1800 Mhz “ says a top executive of a telecom company.

Operators also argue that failure of the auction could open up serious challenges – force a re auction (as is being agreed upon in 800 MHz CDMA where there were there were no bidders) at a lower base price which could be challenged in courts, and also make it difficult for government to have an auction discovered price for one time spectrum charges in these circles.  Says a COAI member: “It is quite possible that in as many circles there might not be any bidders at all. And a large chunk of the spectrum will remain unsold. So re-auction has to happen, but if it is done at a lower base price, those who buy now will go to court”. 

However attempts have been made to get out of the legal wrangling. In July DoT offered telcos a package including a liberalised spectrum regime, re-farming of 800/900 MHz spectrum, giving up of imposing one-time fee retrospectively provided companies withdraw all court cases.  But this attempt to compromise failed with companies like Tata Teleservices opposing the move saying it was unfair to CDMA players.

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