Spectrum scandal taints all it touches

Tony Poulos
20 Apr 2012

"The Great Indian Spectrum Scandal", as I choose to call it, shows no signs of abating. The Telecom Regulatory Authority of India (TRAI) has recommended to the government that holders of cancelled 2G licenses should not be compensated for their loss.

It claimed there was no need for a separate "exit policy" to be put in place and that the fees already paid "continue to be non-refundable". The recommendation came after some of those affected had called for the refund of license fees on a pro-rata basis, subject to the companies involved having met the conditions of issue (e.g. rollout obligations).

It also looks very unlikely that fees will be carried-forward as partial payment if those already "disenfranchised" are successful in bidding for the re-issued licenses in the future, presuming they have any confidence left in dealing with the Indian authorities. In any case, this may be a long way off with the telecom ministry stating it could take some 400 days to hold an auction to redistribute the licenses.

According to news reports, Telenor will seek nearly $14 billion in damages from the Indian government, following the cancellation of the 2G licenses held by its Indian joint-venture Uninor. The company has reportedly made the threat in a letter to the prime minister's office and telecom ministry, and also repeated threats to take the government into international arbitration. The company says it breaches existing trade agreements between India and Singapore where Telenor's Asian operations are registered.

Russia's Sistema last month invoked the provisions of a treaty between India and Russia to try to recover some of the investment sunk into its own 2G joint venture, Sistema Shyam.

One wonders why a group of these 122 ex-license holders have not banded together for a class action against the TRAI and the Indian government. Perhaps some are nervous about how they were initially awarded the licenses and fear exposure of their activities, or is it simply seen as a futile exercise?

In the meantime, the original perpetrators of what has become one of India's biggest corruption scandals, former telecom minister A. Raja, and a number of other company executives and government officials, are yet to face trial. Until it is proven in court that the granting of the licenses was indeed fraudulent then the license rescission actions may be a little premature. After all, the cancellation of the licenses was based purely on the premise that, they were under-priced and favored some firms, supposedly costing the treasury up to $39 billion, their current estimated value.

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