Even as the auction of 2G telecom spectrum is set to begin tomorrow, the government faces the spectre of a series of legal challenges from companies. That could lead to another phase of uncertainty in the sector.
On the face of it, the empowered group of ministers on telecom and the Cabinet have taken some key decisions in the past few months, which seem to have resolved all contentious issues.
They have pushed through the proposal to refarm spectrum in the 900-MHz band to 1,800 MHz, allowing incumbent operators to keep only 2.5 MHz.
They have also imposed a one-time spectrum charge on incumbent GSM operators for spectrum they hold beyond 4.4 MHz (2.5 MHz for CDMA players). An auction base price has been fixed at Rs 14,000 crore (Rs 140 billion) for five MHz in the 1,800-MHz band.
However, GSM operators are bracing to challenge at least two of these decisions in court. Says Rajan Mathews, director general of Cellular Operators Association of India (COAI), "The choice is clear: either the government rectify its decisions or everything will have to go to court, leading to months of uncertainty."
COAI says it will challenge the refarming move because under their contracts, telcos' licences were to be extended, not renewed as the government now says. CDMA operators are also getting ready to challenge the decision asking them to pay a one-time spectrum charge prospectively.
Says Ashok Sud, secretary general of AUSPI, which represents dual-technology players, "It is very clear to us that our contracted spectrum is up to five MHz. We have taken the opinion of legal luminaries and they have supported our view."
The Supreme Court last week asked the government to explain why the entire spectrum available after the cancellation of licences had not been put up for auction. It was hearing a petition filed by COAI and some operators. Experts say the entire refarming process is pegged to a final decision on this issue.
"If all spectrum (out of 471 MHz, only 271 MHz is up for auction) has to come up for auction now, it would mean the death of refarming as there will be no spectrum available for refarming from 900 MHz to 1,800 MHz," says a top executive of a telecom company.
To avoid legal trouble, the department of telecom in July offered telcos a package, including a liberalised spectrum regime, re-farming of 800/900-MHz spectrum and no imposition of a one-time fee retrospectively, provided the companies withdrew all court cases. But the attempt failed, as companies such as Tata Teleservices [ Get Quote ] opposed the move saying it was unfair to CDMA players.