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Monday, 13 February 2012 01:09
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Qualcomm case keeps investors on edge

If the uncertainty over whether the government will refund licence fees paid by the firms whose 122 licenses were cancelled by the Supreme Court on grounds they were illegal isn’t bad enough, the tax department is asking the finance minister to allow it to appeal the SC judgment that described its R11,000 crore demand on Vodafone as a case of capital punishment for capital investment. The situation remains tense for 50+ telecom licenses given out between 2002 and 2007 as a result of the SC judgment — the Attorney General is to study the judgment and advise the government on its implications including those on auctioning coal and other mines.

If that wasn’t bad enough, the Qualcomm saga continues more than 20 months after it won bids for broadband wireless access (BWA) licences in four telecom circles in June 2010. Fifteen months after Qualcomm won the bid and paid $1bn, the Department of Telecommunications (DoT) rejected its application for an internet service provider license, necessary if it was to offer BWA services. After pressure mounted, the DoT said it would grant the licenses and began processing the applications and seeing whether Qualcomm or its Indian partners had any pending dues – that is where the next round of the Qualcomm saga is being played out. In 2009, Tulip Telecom, now one of Qualcomm’s partners, was given a notice to pay R193 crore as license fee for FY07 and FY08 — Tulip challenged this by saying DoT was incorrectly adding the income it earned from manufacturing to its telecom service revenues. DoT finally lowered the demand to R2.5 crore and Tulip paid this in October 2009. When the DoT did the assessment for FY10 and FY11, Tulip was given a demand for R146 crore and promptly challenged it saying its manufacturing income was once again being added to its telecom services revenue. Since this was holding back Qualcomm’s license, it offered to pay the amount if Tulip didn’t after the case was finally resolved, and to give a bank guarantee for this. This was on January 23, 2012 before the TDSAT which gave DoT a week to react. On January 31, however, DoT asked for another week, and on February 6, it asked for another week. This got the telecom tribunal’s judge quite angry and when he asked the DoT’s lawyer just what was going on, he was told DoT had sent Tulip another notice for R264 crore for previous years – for FY06, for instance, Tulip would now have to pay R14 crore, R43 crore for FY07 and R90 crore for FY08.

While Qualcomm is still to decide if it should give a bank guarantee for this as well, its big problem is that it doesn’t know if yet another demand can get made. The only thing that’s certain for now is that the TDSAT will have another dispute to hear and that Qualcomm has another long wait ahead.

 

 

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