India cancels all 122 licences awarded in 2008
The new wave of 2G allocations was supposed to address capacity crunch, but process was corrupt and undercharged operators
Published: 3 February, 2012
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The rumbling crisis over India's disputed 2G spectrum sales has come to a dramatic head, with the Supreme Court cancelling all 122 of the licences issues since January 9 2008. These 2G franchises were all allocated while the disgraced former Telecom Minister, A Raja, was in power.
The scandal over the 2008 licence awards, which were accompanied by extensive corruption and rule-breaking, has rippled through the political establishment and led to dozens of arrests. The chief problem, according to last year's Comptroller and Auditor General report, was that licences were issued at 2001 prices, and with no auctions, which meant that the government raised about $35bn less than the frequencies should have been worth (though some bodies dispute that calculation).
The Supreme Court now wants all the licences cancelled but is giving the telecoms industry and ministry four months to work out a plan. Otherwise, some operators which have already built out the spectrum may have to shut down their networks, in a country where the 2G capacity is struggling to meet exploding demand anyway, leading to poor quality of service.
Many foreign players acquired the 2G concessions to get a foothold in India's rapidly growing mobile market, even though the major established cellcos, such as Bharti Airtel, Reliance Communications and Vodafone, had a significant headstart, and have also now got the lion's share of 3G spectrum. The holders of the 122 licences are led by Telenor joint venture Uninor, which has 22; Videocon, Loop Telecom and MTS India, with 21 each; Etisalat-DB (15), Idea (9), S Tel (6), Spice Communications (4) and Tata Teleservices (3).
As well as the corruption allegations, the new wave of 2G allocations has been criticized for allowing too many players into the market, putting further pressure on the world's lowest ARPUs and risking situations where some cellcos could not generate enough revenue to invest in decent networks. The enforced recall is likely to see the regulator TRAI reducing the number of licensees per circle (operating region), while the government aims to relax M&A rules to make it easier for small cellcos to consolidate and become more viable.
The court has ordered that TRAI should "make fresh recommendations for grant of licence and allocation of spectrum in 2G band in 22 service areas by auction, as was done for allocation of spectrum in 3G band."
Three affected carriers - Etisalat DB, Unitech Wireless and Tata Teleservices - have been fined $1m apiece. Others - Loop Telecom, S Tel, Allianz Infratech and MTS India - were each fined $100,000.
In cancelling the licences, the court declared that it was reversing a process which had been "totally arbitrary and unconstitutional", and Subramanian Swamy, one of the petitioners in the case and the head of the Janata Party, commented: "This is a major step forward for us in the war against corruption."
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