Breather for telcos as SC okays auction by Aug 31

Written by Indu Bhan | Indu Bhan | New Delhi | Updated: Apr 25 2012, 08:08am hrs
Delivering a breather for telecom operators and brickbats for the government, the Supreme Court on Tuesday extended its earlier deadline of June 2 to conduct 2G spectrum auctions by three months while rejecting the governments request for 400 days. Auctions will now be conducted by August 31 and telcos will be allowed to operate until September 7. The telecom industry welcomed the extension.

You ask for 400 days. That is your prayer. How much time did you take to complete the process in 2008 The entire exercise could have been avoided if a little more effort had been made, the bench said, rejecting attorney general GE Vahanvatis request to extend the auction deadline until March, 2013 citing practical difficulties.

Tuesdays directions were in response to the governments clarificatory petition on March 1 seeking more time after the court order on February 2 struck down 122 telecom licences as illegal.

The development was welcomed by Uninor and Sistema Shyam, two of the nine operators who stand to lose their licences and intend to participate in fresh auctions to continue operations. The two had requested the court that their licences not be cancelled before auctions. Uninor and Sistema Shyam together have around 53 million of Indias 900 million-plus mobile users.

The development comes a day after the Telecom Regulatory Authority of India (Trai) recommended the modalities for conducting auctions. The regulator on Monday set a steep reserve price of R3,622.18 crore for auction of per MHz spectrum in the 1,800 MHz(GSM services) band, which means new operators like Uninor must pay R18,110 crore for 5 MHz.

In 2008, the company had acquired a pan-India licence with a bundled 4.4 MHz spectrum at Rs 1,651 crore. Uninor has expressed concern at such a high reserve price as has the overall telecom industry.

Investors on Tuesday gave a thumbs-down to the Trai proposal, offloading shares in telecom companies. Shares in Bharti Airtel fell as much as 7.5% to their lowest level since July 2010, while Idea Cellular slumped as much as 9.8% before cutting some losses. Bharti closed 1.7% down at 307.35 rupees, while Idea ended 4.2% down at Rs 79.90 rupees. At 1247 GMT, Telenor shares were up 1.1% and Sistemas London-listed shares were almost 4% lower.

The refusal to grant time till March 2013 means the government must move fast and decide on the Trais recommendations and hire an auctioneer. It is expected that an empowered group of ministers will take a final decision on the modalities of auctions.

A bench of justices GS Singvhi and KS Radhakrishnan while rejecting the governments plea for extension of time beyond August 31 said: In our view, it will be just and proper to partially accept the averments made in the application (by the Centre)... accordingly, the time specified for conducting the auction and grant of licences is extended up to August 31, 2012.

We are still not in position to believe that officers of the department of telecommunications are so naive that they overlooked all this... Justice Singhvi observed.

The bench also disposed of various applications filed by telecom companies seeking a direction to the government to complete the auction and allotment process by June 2. It warned the telecom companies from filing further such application, saying it will impose exemplary costs on them.