FinMin contests DoT on recharging for spectrum

The Ministry of Finance has criticised a proposal to charge incumbent telecom operators prospectively for the remaining period of their licence for spectrum at market prices, saying this would open the doors for litigation.

The Department of Telecommunications (DoT), in a draft cabinet note, had proposed that incumbent operators pay the market rate, to be determined in the coming auction for all 2G spectrum they have for the remaining period of their licence. Older incumbents have supported the proposal, but the newer ones, which got licences much later and therefore have many years remaining for renewal, have said this favours the older players.

 

The ministry agrees the government has the right to change licence conditions, provided these are of “overriding national interest”. It has raised the question as to whether the stated ground of providing a level playing field among existing and new players is of such “overriding public interest” to warrant the change in licence terms and conditions, and says it will be open to litigation.The power of the licensor to modify at any time the terms and conditions of the licence can only be exercised if in the opinion of the licensor it is necessary to do so in public interest or in national security, the ministry has said.

The finance ministry asked also asked DoT how cabinet approval had been sought for the above proposal when a reply on the Presidential Reference in this regard was still pending.

It also argued that auction of future spectrum and leaving existing arrangements unchanged did not mean that it would deny newer players a level field. It says the issue is not of competitive advantage but whether the government felt incumbents should continue to enjoy unpriced spectrum. Unilaterally changing the terms could be said to violate the contract.

The ministry says existing operators will argue they’ve made huge investments on the understanding that spectrum was allotted to them for a certain period on certain terms and the investments made were to yield returns over the period as a whole. Where foreign investors are concerned, there is also the questions of possible action they could take under bilateral investor protection agreements, it adds.