The Indian Department of Telecommunications (DoT) will send notices to five companies that were granted 85 licences in 2008, asking them to explain why their licences should not be cancelled, Telecom minister Kapil Sibal reportedly told journalists.
The…
The Indian Department of Telecommunications (DoT) will send notices to five companies that were granted 85 licences in 2008, asking them to explain why their licences should not be cancelled, Telecom minister Kapil Sibal reportedly told journalists.
The Telecom Regulatory Authority of India (Trai) recently proposed cancelling the 2G licences of several new entrants, following the resignation of former telecom minister A. Raja after months of controversy around the allocation of underpriced 2G spectrum in 2008 and allegations of favouritism.
Earlier this month, the Comptroller and Auditor General of India (CAG), the government’s auditor, issued a report saying that the 2G spectrum allocation had caused a Rs1.76 trillion (US$40bn) loss to the government, after licences were sold to mobile operators based on a price determined in 2001.
Trai also reportedly argued that the companies did not meet their roll-out obligations, which include covering at least 10% of the district headquarters by the end of the first year of receiving licences.
As of January 2010, only two companies – Uninor in eight circles and S Tel in three circles – had launched operations, according to local reports. But Loop Telecom, Videocon Telecommunications and Etisalat DB reportedly also claimed to have launched services after January 2010.
Now, it is possible that all five companies could see their licences cancelled, as they did not fulfil eligibility requirements – such as meeting share capital minimums, according to reports. The licence holders have been given 60 days to respond, and a decision will be taken once the replies are examined.
Besides potential cancellations, a few Indian and foreign mobile companies may have to pay as much as US$1bn each to the Indian government for additional spectrum they received in 2008, reports wrote.
According to government officials cited by the Financial Times, the US$1bn bill mainly targets Bharti Airtel, BSNL and Vodafone, since their bids reportedly cost the government US$8bn in missed revenues, according to claims by the Comptroller and Auditor General of India.
“The government is currently facing intense pressure to take some steps in the 2G scam. There are many suggestions, including imposing fines, revoking the licences, or getting compensated for the loss etc, and it’s really difficult to say what the final decision will be. But for now it’s really a question of wait and see,” Ravishankar Raghavan, a principal in the Tax Group at Indian law firm Majmudar, explained.
The Central Bureau of Investigation recently told the Supreme Court in an affidavit that it will wrap up its investigations by early next year and file the charge sheet within the following month.
Some experts in the industry argue that revoking the licences or allowing the new telcos to sell their licences and airwaves might actually help thin out India’s mobile phone market, which comprises some 15 operators.
