Presidential reference on 2G could place older licences at risk

Does judgment imply that licences granted on the principle of first come, first served since 2001 do not have a legal standing?

The government's proposed Presidential reference seeking a review of the Supreme Court judgment cancelling 122 telecom licences is likely to stir up serious torment for telecom players by questioning whether or not all the licences and linked spectrum granted since 1994 using methodologies other than auctions are illegal.

The government specifically wants to know whether the SC's January judgment implies that licences granted on the principle of first come, first served (FCFS) since 2001 have a legal standing. It has also questioned the legality of the dual technology licences awarded in 2008.

“While the decision to opt for a Presidential reference is yet to be finalised, as are the questions which should be included, legal clarity on these issues will be sought in some manner, either through the Presidential reference or by the Telecom Ministry itself,” a senior DoT official told

The Hindu .

More confusion likely

Far from providing clarity, any such legal reference even outside the Presidential reference is likely to end up creating more confusion, casting a shadow of gloom over the telecom sector.

Specifically, this affects roughly 81 licences, which include 22 basic services licences issued in 2001 which migrated to the UASL regime in 2003, 26 UAS licences issued by Arun Shourie in 2004, and another 25 issued by Dayanidhi Maran between 2004 and 2007. Of these, Aircel owns the maximum (21) licences, followed by Reliance (18 dual technology), Tata (17 dual technology), Vodafone (9), Bharti (6), and Idea (2). In 1993, 8 licences were issued for the 4 Metro circles through a beauty parade. In addition, there are roughly 29 NLD and an equal number of ILD licences issued since 2003, which were given without an auction based on a fixed price of Rs. 100 crore for NLD and Rs. 25 crore for ILD till 2006, after which the entry fee was reduced to Rs. 2.5 crore each for both categories. The company that is perhaps least affected by these latest developments is Bharti, and to an extent Idea, which has already suffered cancellation of 9 licences earlier in February.

Till February 2012, India had roughly 280 Unified Access licences, 122 have been cancelled as of February 2, 2012, while another 81 are now likely to be placed under the legal scanner. This leaves only 77 mobile licences unscathed, of which roughly 38 were issued through a bidding process in 1995, 17 through the 2001 auction and the remaining awarded to BSNL and MTNL between 1999 and 2000.

The government's motivation in framing the Presidential reference in the manner that the internal notes suggest is unclear. Especially considering that the Supreme Court has already ruled (in response to senior counsel Harish Salve's plea) that the judgment does not apply to licences issued before 2008 since those were not in front of the court.

If these questions of law are included in the Presidential reference which, in turn, will be resolved through open court hearings of the Constitutional Bench, a dominant part of the telecom industry faces an uncertain future until legal resolution is available. This could take from four months to more than a year, jeopardising the present and future investment plans and placing the auction of spectrum that is expected back from the 122 cancelled licences at risk.