Barriers may force DoT to approach court for second extension

Indications are that multiple barriers on account of pending decisions within the Department of Telecommunications, if not removed over the next 12-15 days, could force the government to approach the Supreme Court for a second extension of its deadline of August 31 to conclude the 2G spectrum auction.

This becomes even more important amidst talk of downgrading the status of the empowered Group of Ministers on spectrum to just a GoM with merely recommendatory powers. This means the final decision on pricing will entail an additional step of securing Cabinet approval, leading to extra days in an already tight schedule.

Settling reserve price

Settling the reserve price is amongst the key issues that need to be resolved before the auction dates and details are announced.

Additionally, bidders would need to have clarity on issues such as licence fee, revenue share and spectrum usage charge payable.

There are also concerns relating to mortgage of spectrum to banks which are expected to bankroll the bidders where the upfront bid amount is concerned. Usually, bidders get no more than 10 days to make full and final payment.

Where the existing foreign investors such as Telenor or Etisalat are concerned, there might evolve a provision under which the company can bid as 100% foreign direct investment-held firm with the caveat that it will dilute its stakes to 74% within a stipulated period. Whether such a provision will propel the existing foreign investors to rebid for their lost spectrum is dependent on a wafer-thin business case.

Over 950 m. subscribers

Currently, there are more than 950 million subscribers on the different mobile networks, of whom merely 75 million are affected by the cancellation.

Finally, the government’s clock on cancellation of licences is also ticking. All holders of 122 licences — many of which have already stopped functioning or didn’t launch services to begin with — will need to cease operations in line with the Supreme Court’s renewed directions by September 7, 2012. This leaves the government exactly 60 days, starting July 6, to complete the auctions.

In the worst case nightmare situation, even if the government somehow conjures up all the pre-bid permissions and mandatory information before announcing the NIA (notice inviting applications) — and begins the bidding before August 31, there will be no guarantee of the auction concluding by September 7 — by when the licences will be cancelled and services terminated for their roughly 75 million customers.

Worrying precedent

The 3G auction is also a worrying precedent as it took 34 days and 183 rounds of bidding to conclude. In fact, originally the government had sought 400 days to complete the 2G auctions from the Supreme Court through a clarificatory appeal filed in March 2012. The government had cited the fact that it had taken 1,560 days to conduct 3G auctions from beginning to end.

It is becoming increasingly clear that the government will need to either get its house in order within a fortnight or approach the court again for a fresh extension, both for the existing licences which should rightfully be co-terminus with, not the beginning, but closure of the upcoming 2G spectrum auctions.

The most significant step in this direction would be to find a willing and credible Union Minister to fill the position of chairman of the GoM vacated by Pranab Mukherjee and swiftly thereafter by Sharad Pawar.

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