With Vodafone moving to the Delhi High Court last week to challenge the central government’s rejection of its licence-extension application for the Delhi/Mumbai/Kolkata circles—Bharti Airtel’s applications for Delhi and Kolkata have also been rejected—there is almost no decision of the government in the telecom space that is not before one court or the other. While the government had initially said it would take back the 900 MHz spectrum the older firms had, in various circles, at the time their licences came up for extension and replace this with 1800 MHz spectrum (re-farming in telecom jargon), the government’s latest position is that no licence will be renewed unless telcos bid in the auctions for 1800 MHz spectrum. The telcos, in turn, argue the base price for the auctions is way too high and, in any case, licence extension is their natural right. In the case of the 3G intra-circle roaming—this allows an Idea customer in Delhi to get 3G services using Vodafone’s 3G spectrum even though Idea has no 3G spectrum in Delhi—the case is before both the Delhi High Court as well as the Supreme Court. While telcos argued the government had allowed intra-circle roaming, and in writing, at the time of the bids in 2010, the government had asked them to stop these services—the case went from the TDSAT which delivered a split verdict since it has only 2 members instead of the required 3, to the Delhi High Court and the Supreme Court. Telcos are also fighting a case at the TDSAT as well as in various courts on what the definition is of “adjusted gross revenues” on the basis of which licence fees/spectrum charges are paid. The one-time levy for “extra” spectrum beyond 4.4 MHz is also in court with the telcos arguing they got spectrum as per the then policy and if a change is to be made now, it cannot be made retrospectively. Linked to this is the larger question of whether the government can be charging high up-front fees in auctions along with high annual 8-10% licence/spectrum charges since this makes the business quite unviable.
How the Empowered Group of Ministers (EGoM) chooses to deal with the issue is not clear, but unless a resolution is quickly found, the telecom industry’s future is at stake. The industry’s dramatic worsening fortunes—in the case of Bharti Airtel, the Zain debt made it worse—can largely be traced to unhelpful government policy. Apart from the fact that it makes little difference to government revenues if intra-circle roaming is allowed, the government needs to come up with sensible rules on M&A which allow firms to hold more spectrum—this lowers costs dramatically as usage efficiency goes up—and even renegotiate with the defence ministry to release more spectrum for both 3G and 4G services. This is the kind of solution that was attempted in the form of NTP 1999—a precondition was that all court cases had to be recalled—and apart from the exchequer earning more revenues as a result, the consumer benefited from the lower tariffs that resulted. Bruising court battles help no one except for a handful of lawyers.