India’s Supreme Court has revoked 122 telecommunications licenses awarded across 32 service areas.
Government auditors calculate that irregular allocations of 2G licences and spectrum to some Indian operators in 2008 could have cost the country $40 billion. The Indian government will now have four months to auction the licences and spectrum. Reports suggest that 5% of connections used by mobile phone customers will be affected. Consumers will need to change their service providers, or wait for new licenses to be issued.
The licences were issued by former minister of communications, Mr Andimuthu Raja, who allegedly mis-sold bandwidth. Mr Raja is currently in jail pending trial, he denies the allegations which are being investigated by India’s Central Bureau of Investigation. The judges also ordered a court to decide whether Home Minister Palaniappan Chidambaram should be investigated. Mr Chidambaram has been criticised by opposition MPs who accuse Mr Chadambaram of failing to prevent the scandal when he was finance minister and have called for him to resign on ‘moral grounds’. Opposition MP, Mr Subramanian Swamy alleges that licence pricing decisions were taken jointly by Mr Chidambaram and Mr Raja and Mr Chidambaram could have stopped Mr Raja from allocating bandwith on a ‘first-come-first-served’ basis.
The ruling will have an impact on the Indian joint ventures of multinational companies such as Telenor and Etisalat who have stakes in Indian companies granted the licences. Uninor, the Indian joint venture of Norway’s Telenor, said: ‘We have been unfairly treated as we simply followed the government process we were asked to’. Following the verdict, shares in Telenor ASA fell 3.1 percent in Oslo trading. Telenor President Mr Jon Fredrik Baksaas said ‘if the worst comes to worst, it will be the end of Telenor’s business in India’ and 30 million customers could face losing their connection.
Principal research analyst at Gartner, Mr Kamlesh Bhatia, said that the decision by the court reflects its bid to bring some order and transparency into India’s telecommunications industry which has seen a paralysis in decision making recently.