Indian SC quashes 122 telecom licences

Reuters: The Supreme Court on Thursday revoked all 122 telecom licences issued under a scandal-tainted 2008 sale, a fresh embarrassment for the Government, plunging the mobile network market of Asia’s third-largest economy into uncertainty.

The ruling is a setback for Prime Minister Manmohan Singh’s Government, which oversaw the sale of the licenses at below-market prices, costing the exchequer up to $ 36 billion in lost revenues.

The licences affected by Thursday’s ruling include all of those held by Unitech Wireless, the Indian joint venture of Norway’s Telenor and Unitech.

“We have been unfairly treated as we simply followed the Government process we were asked to,” the Telenor joint venture said in a statement. “We are shocked to see that Uninor is being penalised for faults the court has found in the Government process.”

The telecom scandal is the biggest of several that have emerged during Singh’s second term and triggered massive street protests last year. Two ministers, including former Telecoms Minister Andimuthu Raja, who presided over the 2008 grant process, have resigned. Raja is in jail awaiting trial.

“This country is no longer willing to allow these corrupt corporations and these corrupt public officials retain the benefits of their illegal and corrupt actions,” said Prashant Bhushan, a lawyer and petitioner in the case.

India is the second-largest cellular market in the world by subscribers, with 894 million at the end of December, although the market is crowded with more than a dozen operators, making call rates among the lowest in the world and squeezing margins.

Investors and operators have long been calling for consolidation in the crowded industry, and Thursday’s ruling stands to benefit the country’s biggest operators, including Bharti Airtel and Vodafone.

“Players like Bharti Airtel and Idea Cellular with popular brands and strong balance sheets will be clear beneficiaries because they can take advantage of this situation and increase market share,” said Jagannadham Thunuguntla, Head of Research, SMC Investments and Advisors, Mumbai.

Stocks in telecom companies including Reliance Communications and Unitech fell after the verdict, but shares in Bharti Airtel jumped.

“For foreign investors, it is a very bad news. What mistake did they make? They partnered with Indian companies, invested lots of money and followed the process of that time,” said Rishi Sahai, Director at consultancy firm Cogence Advisors in New Delhi.

The Supreme Court said the current licenses will remain in place for four months, in which time the Government should decide fresh norms for issuing licenses, a lawyer involved in the case said.

India’s image as an investment destination was dented over the past year as the economy slowed, Government reforms stalled and the telecom scandals along with other high profile graft cases heightened concerns about government policies.

“This is a collective failure of the Government of India, said Subramanian Swamy, an opposition politician who brought the petition to revoke the license. “The court has said that the Government must now get the market value of these licenses.”

Loop Telecom Pvt. Ltd. and Videcon Telecommunications, part of India’s Videocon group, are also affected, along with Etisalat DB, the joint venture between Abu Dhabi’s Etisalat and India’s DB group and S-Tel.

Thirteen licences held by Idea Cellular and three held by Tata Teleservices are also affected.