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Thursday, 01 March 2012 04:15
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Govt needs a plan to deal with Sistema invoking treaty

With Russia’s Sistema, the majority holder (56.7%) in Sistema Shyam TeleServices, invoking the bilateral investment treaty (BIT) to give the Indian government six months to find a solution to the Supreme Court cancelling its licences, other firms whose licences have been cancelled will be looking to see how the government plans to deal with the case. While some of the others, like Telenor, have not gone and filed under BIT—it has filed a case against its Indian partner—their arguments are essentially the same, that they bought into a valid Government of India-issued licence, so they cannot be penalised for this now that the SC has said the procedure to grant the licences was faulty. What makes matters more difficult for the government is that, after A Raja granted 122 licences to a clutch of firms, the government issued several other clearances to these firms – so if there was any suspicion that the licences were not kosher, the subsequent permissions suggested the licences were kosher. Indeed, several meetings were held between the Prime Minister and other senior ministers, making it clear the government was fully in the loop with regards to the licensing procedures. More so since, till the SC judgment came out, the government’s stand has been that the first-come-first-served (FCFS) rule was a valid one.

Since there is no certainty about how long the SC will take to review the case, if indeed the government finally goes ahead and files a review petition, and even what its ruling will be, the government needs to have a clear plan on how it can assuage firms like Sistema which are arguing their legitimate business interests have been hurt. One option, of course, is to let the chips fall where they will and fight the case in the arbitration court, but that seems a risky strategy, more so since, till the ruling, the government had been arguing the FCFS policy was a good one. Speeding up the process whereby the spectrum can be auctioned quickly, if possible before the

4-month period that the SC has given to cancel the licences is up, will also help as it will give the cancelled licensees another shot at the Indian telecom market. The advantage of a shorter auction cycle is that it gives these firms a chance at retaining their customers—if the auctions take a long time, even if these firms win the auctions and make a re-entry, they’ll have lost their customer base anyway. It would also be a good idea to hone up on arguments that, given many of the firms had not fulfilled their licence obligations for rolling out networks—that’s why Trai had recommended 74 licences be cancelled—the government is under no obligation to refund their investments. If the case goes to arbitration, every little bit helps.



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