The Supreme Court's reply to the Presidential reference on the allocation of natural resources has put the ball back in the government’s court on the contentious issue of imposing a one-time charge on incumbent telecom operators, who have received spectrum beyond the terms of their licence.
On all other issues, including the future of licences given to incumbents before 2008 on the controversial first-come-first-serve basis and dual technology licences, the status quo will be maintained, meaning there is no question of any cancellation, say experts and telecom companies.
The government had earlier referred these issues for an opinion from the Supreme Court, which on Thursday refused to give any opinion.
According to Telecom Minister Kapil Sibal, who held a press conference after the SC decision, the court was not entitled to give answer to the additional three questions. “If the answer to the first five questions would have led to the affirmation of the February 2012 judgment (that all natural resources should be auctioned), then the court would have answered the rest of the questions. Whatever decisions are left to be taken, will be taken by the government.”
The industry, however, is cautious in its response. “We have nothing to cheer about or weep. It’s status quo. The SC has not opined about the spectrum allocated before 2007, dual technology or whether the government should withdraw the spectrum allocated to all existing licencees or to charge for the same with retrospective effect, said Rajan Mathews, director general of the Cellular Operators Association of India (COAI), the industry body representing GSM players. “We would have liked some clarification, but now, it’s up to the government and DoT (Department of Telecommunications) or the EGoM (empowered group of ministers) to take up these issues,” he added.
It is only after the government decided on these issues that many operators could take legal recourse, challenging these decisions once again, Matthew said.
Some operators say this would only increase the period of uncertainty in policy decisions.
The EGoM on telecom had decided to postpone a final call on imposing the one-time fee on incumbent operators till the the SC advice. It can now go ahead and take a final decision.
Different models have been talked about on how to impose the one-time fee based on market determined rates--whether all the spectrum with incumbent operators should now pay the 2G-discovered auction price, whether only spectrum beyond the contracted 4.4 Mhz spectrum should be charged or whether the cut-off should be 6.2 Mhz. If the charge should be imposed retrospectively or prospectively from a determined date should also be decided upon. The move, if cleared by EGoM, will force older operators such as Bharti Airtel, Vodafone Essar, Idea Cellular to fork out thousands of crores.
Also, DoT will need to clarify its position on the 51 mobile licences and 22 basic service licences, which were given between 2001 and 2007 on a first-come-first-serve basis, which was rejected by SC.
Sibal made it clear the government would respect the February 2012 verdict of the SC. “We will go ahead with the auction of 2G spectrum that was released after cancellation of the 122 licences as per SC guideline.”
“We hope that subsequent to this judgement, irrespective of the method followed, essential criteria, namely transparency, clear regulatory and licensing framework, non-discretionary procedures, are adhered to so as to obtain the maximum benefit arising from the allocation of nation’s wealth of natural resources,” said Sidharth Birla, vice-president of the industry lobby, Federation of Indian Chambers of Commerce and Industry.
According to Hemant Joshi, partner, Deloitte Haskins and Sells: “Although SC has emphasised that revenue maximisation cannot be the primary objective of auctions, telecom sector is not given this benefit. Telecom should be viewed as a strategic industry as it enables growth and promotes financial and rural inclusion through efficient delivery of education, healthcare, banking, etc. to masses.”