Cancellation of 2G mobile licenses in India could have shocking aftermaths at regional level

India’s Supreme Court has stunned the country’s mobile sector by cancelling all 122 2G mobile licenses that were awarded by the government in 2008. The companies whose licenses are canceled include Uninor (joint venture between Unitech and Telenor of Norway), Sistema-Shyam (joint venture between Shyam Telecom and Sistema of Russia), Videocon, Loop Telecom, Idea Cellular, Etisalat DB (joint venture between DB Realty and Etisalat of UAE) among others.
These licenses were obtained by operators at highly undervalued prices of spectrum in 2008 paying INR 1,658 crores ($350 million) for all-India license. The administration at the time was led by former Telecommunication Minister Andimuthu Raja found accused of issuing 2G licenses on a first-come-first served basis, causing a potential loss of $39 billion to the country.  In 2011, TIME magazine listed Mr. Raja’s 2G spectrum scam as number two on their “Top 10 Abuses of Power” list (just behind the Watergate scandal)
During its verdict, the court has declared the award of licenses to be “totally arbitrary and unconstitutional”. The decision will badly affect the eight start-up operators that have launched in their operations in the country during the interim period backed up by International operators, notably Norway’s Telenor and Etisalat of the UAE. These operators will be allowed to operate for only four more months as the cancellation takes effect four months from the court’s verdict on February 2.
The Ministry of Communications and Information Technology feels cancellation of licenses may lead to litigations and spoil the present economic environment boom in the country. The market has also reacted swiftly where stocks of mobile companies whose licenses have been cancelled crocked instantly.  “We are closely reviewing the entire issue, cancellation of licenses cannot be a viable step forward as it would not only affect the high revenue-generating telecom industry, but also hit foreign direct investment, as leading global players have invested hugely in the Indian telecom sector” said a senior official from the ministry.
Uninor, the Indian joint venture of Norway’s Telenor, said it had been “unfairly treated” and “was shocked” by the court verdict.  Telenor President, Jon Fredrik Baksaas has said that the ruling was “extraordinary”. “There’s frustration we are not seeing a regulatory framework with some nuts and bolts so it justifies the numerous investments that we and others have made,” he said. “If the worst comes to worst, it will be the end of Telenor’s business in India,” he added. The company also did not rule out an exit from India and may not bid for the spectrum auction if the auction rules were not conducive or if the base price for the sale process was set very high.
Likewise in a statement issued by Etisalat, the company said that it could exercise its right to a review of the Supreme Court’s decision after going through the judgment and its ramifications on their operations. Companies can file for a review of the Supreme Court’s order.  The company also said that “Supreme Court decision relates to events that occurred in January 2008, well before December 2008 when Etisalat invested in Swan. Etisalat has no knowledge of what occurred in the licence application process for Swan, far less did it have any involvement.”
Following the Supreme Court order, telecom regulator TRAI has started the process of auction of 2G spectrum and issued a pre-consultation paper on the same inviting comments from stakeholders.
The decision has not only shocked the country’s mobile market, but its aftermath is observed at the regional level as well. As a matter of fact, the present Government of India could be one of the aftermath’s effectee. The court ruling has appeared as a source of further embarrassment for the government of Prime Minister Manmohan Singh which has already been hit by several high-profile corruption cases in recent months. Chief Minister Narendra Modi has asked Prime Minister Manmohan Singh to resign after the Supreme Court verdict. Meanwhile, Subramanian Swamy, one of the petitioners in the case before the Supreme Court and the head of the Janata Party has said that “cancellation of 2G licenses by the Supreme Court clearly brought out the big scam and it was a “collective failure” of the government”.