Indian court grabs back 122 GSM licences from operators
Firms devalue to the tune of $25bn
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India's Supreme Court has ruled that the 2G licences awarded in 2008 were not fairly distributed, and has snatched 122 of them back from the operators who were using them.
The court has decided the first-come-first-served approach adopted by then-telecoms minister Andimuthu Raja was "totally arbitrary and unconstitutional", and that the companies who gained from it should be fined. That process led to bands of spectrum being knocked out at discount prices to companies who were first, or were elevated to first, in the queue, raising considerably less money than an auction might have managed.
"This country is no longer willing to allow these corrupt corporations and these corrupt public officials to retain the benefits of their illegal and corrupt actions" says one of the petitioners quoted in The Straits Times.
Raja is currently awaiting trial for fraud, and the court has also decided that Palaniappan Chidambaram, who was India's finance minister at the time but is now minister of the Home Affairs department, should face trial to see if he was involved.
The seven operators concerned have all been hit with considerable fines, but have also seen their share prices tank as it became clear they were going to have to bid for their existing spectrum in an open auction. Some have been expressing outrage, and shock, though the case has been rumbling on for a while and the ruling can't have come as a complete surprise.
Even as the spectrum was awarded, back in 2008, politicians were accused of stitching up the public purse by failing to auction the bands. The scandal even has its own Wikipedia entry listing all the companies, politicians, and journalists who are accused of colluding to distribute the licences.
India's current telecoms minister, Kapil Sibal, is trying to play down the effect on the cellular market, pointing out that only around 5 per cent of India's 900 million mobile subscribers will be hit, and that uncertainty over the 2G licences has been preventing investment in the country.
The uncertainty has now gone, with auctions to be arranged as quickly as possible – hopefully before the current licence-holders ask for their money back. ®
COMMENTS
welcome to india:)
What the announcement means is that current officials want some spectrum cash as well. Rinse and repean in couple of years time:)
New TAX model?
This is all very good but the companies effected will only knock on the effect to customer prices.
Coruption comes in many forms, but rest assured the customer always pays for it and in this case probably twice. Though its a bold brave and fair move they are doing and in that it is probably the right thing to do. Now perhaps introduce some price cap's and other customer protection and politicaly this chap will go far.
There are a couple of points that have had some airtime in India but are generally being glossed over:
The procedure used in 2008 was the same as used previously (when the *big* players got in.)
Aside from any alleged corruption, the method used has enabled very rapid rollout of cellphone use in India at affordable prices (some of the cheapest in the world). Auction prices would undoubtedly have been vastly higher, providing more revenue to the Govt (*not* to the 'common man' as is being touted). In fact the common man *has* benefited by way of cheap calls.
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