NEWS ANALYSIS
Mike@telecoms.com | @telecomsHibberd
Indian 2G licences in limbo as Supreme
Court intervenes after corruption scandal The long-running saga of India’s 2G licence allocation reached a peak this month when 122 licences were revoked, leaving many foreign investors unsure of their future in the country.
T
he Indian 2G licensing scandal reached a sensational crescendo early in February as the country’s supreme court declared invalid the 122 2G licences
that were controversially issued in 2008 by then telecoms minister A. Raja. The licences in question were awarded on a first come first served basis amid accusations of bribery and corruption, and sold at values set in 2001, rather than through an auction. The Comptroller and Auditor General of India submitted
a report to the Indian government in 2010 which argued that, by severely undervaluing the spectrum, Raja—who is currently in jail—cost the national purse as much as $40bn. This figure has been disputed by the Indian regulator, TRAI, and the Central Bureau of Investigation, however. The 2008 sell-off was intended partly to bring new
players into the market, and several large operators— including NTT DoCoMo, Telenor and Etisalat—now face their spectrum being reclaimed. The Indian Government has indicated its intention to reallocate the disputed spectrum, most likely through an auction process.
The 2008 sell-off was intended partly to bring new players into the market, and several large operators—now face their spectrum being reclaimed.
Each of the affected operators will be allowed to continue
offering their services for four months, while the TRAI devises new guidelines for the auction process and decides how to handle any transition of assets between current licence-holders and new licensees. “It’s looking like [the current licensees] could lose all of their investments, but once the regulator comes out with guidelines, there will be more clarity about what kind of losses these operators will make. It’s still not very clear,” said Anubhuti Belgaonkar, senior analyst with Informa Telecoms & Media. The nature of the allocation process is not the only
controversy surrounding the licences, though. A number of the 2008 licensees were already under investigation for failing to meet deployment targets set in the licence conditions. Among these players were Aircel, Etisalat, Loop Telecom, Sistema Shyam and Unitech—the company with which Telenor has partnered in the Indian market. And towards the end of last year it became clear that
all was not well between the Norwegian incumbent and its Indian partner. Unitech filed a petition to the Company Law Board in India accusing Telenor of mismanagement,
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criticising its attempts at fundraising for the venture and offering to buy it out of the Indian operation as a means of settling the issue. For its part, Telenor seems resolved to stay put; not least because of the significant customer base that it has amassed since acquiring the disputed licence. Tor Odland, vice president, group communications for mobile at Telenor, told MCI that, overall, 66 million customers would be affected by licences being revoked, with 36 million of those customers of Unitech Wireless. He added that the Supreme Court announcement
actually stimulated an acceleration in the growth of the firm’s subscriber base. In the approach to the Supreme Court’s decision, Unitech had been signing up 100,000 new customers each day on average, but this actually increased in the days immediately after the ruling. “On Thursday, the number increased to 106,000 new sign-ups; on Friday it was 150,000, and on Saturday, we saw it increase to 175,000,” Odland said, the week after the ruling. He attributed the growth to sales staff in India making a concerted effort to continue growing the subscriber base at a difficult time, and said that the operator may have also benefitted from sympathy and support from the general public in the country. And, with the firm having already invested some two thirds
of the $3.43bn set aside for its Indian operations, Odland said Telenor is reluctant to cut its losses and exit the market. “It’s particularly hard given that we had just begun to
get on track with hitting our targets for 2013,” he said. “We will do what we can to operate in India. Currently, everything is an option. We definitely don’t think of it as a lost cause. It will be challenging but we are inspired to continue,” he said. It may be that for Telenor and its fellow licenses, the only option will be to reapply for the spectrum they feel they already own legitimately, and participate in whatever auction process TRAI decides to put in place. Crucially, TRAI must decide whether or not it restricts the new auction to foreign investors and newcomers once again, or whether it throws the process open to incumbent carriers that are always ready to acquire more spectrum in a rapidly growing market. How the disputed licensees react when they have had a
little more time to absorb the ruling will be interesting to watch. No specific, public accusations have been made, but it is widely inferred from criticisms of the process that at least some of the licensees are believed guilty of bribing A. Raja to get their spectrum allocations at a drastically reduced price. Whether or not they seek compensation from the Indian Government for investments already made, in the event that they do not look to remain in the market after the licences are revoked, will be a telling sign. n
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