UPDATE: India Court Scraps 2G Telecom Licenses Given Post Jan 2008
February 02 2012 - 4:23AM
Dow Jones News
NEW DELHI (Dow Jones)--India's Supreme Court Thursday cancelled
all mobile-telecom-service licenses issued without auction after
January 2008, raising uncertainty over billions of dollars that
companies like NTT DoCoMo Inc. (9437.TO) and Telenor ASA (TEL.OS)
have invested in the South Asian nation.
The ruling, which comes on complaints of corruption in the
license allotment, raises concerns about the foreign investment
climate in Asia's third-largest economy.
Japan's NTT DoCoMo, Norwegian company Telenor as well as
Russia's Sistema JFC (AFKS.RS) and Emirates Telecommunications
Corp. (ETISALAT.AD) of the United Arab Emirates had bought major
stakes in companies that got licenses in 2008 as India presented a
major growth market to global telecom operators.
The ruling could also affect the investments of local groups
like the Tatas and Unitech Ltd. (507878.BY).
The Supreme Court scrapped 122 licenses issued to nine companies
across India's 22 telecom services areas--each service area
requires a separate license--but said the affected companies can
continue operations until the government finalizes new rules for
allotting licenses and bandwidth.
The cancelled licenses include 15 of Etisalat DB Telecom Pvt.
Ltd., majority owned by Emirates Telecommunications; 22 of
Telenor's unit Unitech Wireless Ltd.; 21 of Sistema's unit Sistema
Shyam Teleservices Ltd. and three given to Tata Teleservices Ltd.,
in which NTT DoCoMo holds 26%.
It also cancelled licenses in 13 services areas for Idea
Cellular Ltd. (532822.BY), 21 each for Loop Telecom Pvt. Ltd. and
Videocon Telecommunications Pvt. Ltd. and all the six licenses
given to S Tel Pvt. Ltd.
The court fined Tata Teleservices, Etisalat DB, Unitech
Wireless, Sistema Shyam and S Tel INR50 million (about $1 million)
per service area, and Loop INR5 million for each of its
licenses.
In separate statements, Telenor and Sistema Shyam said they will
consider all necessary actions to protect their investments, while
NTT DoCoMo said it couldn't comment on a business decision that
Tata Teleservices will take post the court order. Other companies
couldn't be reached for comment.
Under law, the companies can file for a review of the order.
"The cancellation of the telecom licenses issued in 2008 will
impact FDI [foreign direct investment] because foreign investors
seek certainty in these types of matters," said Akil Hirani,
managing partner of Majmudar & Co, which advises international
companies on investments in India and cross-border mergers.
"However, on the flip side, the message that the Supreme Court has
sent out is that corruption will be dealt with strictly."
The order comes even as a special court set up by the Supreme
Court is trying a former minister and several others including
former government officials and corporate executives over charges
of corruption in the allotment of the licenses that a federal probe
agency says led to a potential $7 billion revenue loss to the
government.
The agency had charged Etisalat DB, Unitech Wireless and Loop
Telecom and their top executives in the case. They have denied any
wrongdoing.
Thursday's order by a Supreme Court bench comprising Justices
G.S. Singhvi and Asok Kumar Ganguly came on a bunch of 27
petitions, including some filed by advocate Prashant Bhushan and
opposition politician Subramanian Swamy.
The telecom case has been a major embarrassment for Prime
Minister Manmohan Singh's administration, which is facing flak over
large-scale corruption and, of late, indecision on policy
issues--in late December, the government had to go back on its plan
to open up the multi-brand retail segment to foreign investment due
to political opposition.
But the court ruling, which also directed auctioning of all
telecom licenses and bandwidth in future, could bring a financial
windfall for the government as it could auction the bandwidth
currently with the cancelled licenses.
India had raised $22 billion through an auction of bandwidth for
third-generation and broadband internet services in 2010.
However, it isn't immediately clear if the government would have
to refund the fees of companies whose licenses have been
cancelled.
While the ruling is a body blow for the new telecom players, it
could benefit existing players such as Bharti Airtel Ltd. and
Vodafone India Ltd. A lower number of operators could ease the
competitive intensity in India's telecom industry, and see some
call tariffs being raised.
The court said the telecom regulator has to frame new
recommendations for license and bandwidth allocation in a month's
time, and that the government needs to decide on the proposals in
four months.
-By R Jai Krishna and Romit Guha, Dow Jones Newswires;
+91-9967586928; romit.guha@dowjones.com
Telenor ASA (QX) (USOTC:TELNY)
Historical Stock Chart
From Sep 2024 to Oct 2024
Telenor ASA (QX) (USOTC:TELNY)
Historical Stock Chart
From Oct 2023 to Oct 2024