Telcos Look to Drag Govt to Court Explore legal options to challenge policy decisions related to upcoming sale of spectrum

Mobile phone companies plan to drag the government to court over recent policy decisions related to the upcoming spectrum auctions, possibly delaying the sale process and adding to the uncertainty prevailing in this litigation-prone sector.  The industry body representing GSM telcos such as Bharti Airtel, Vodafone, Idea and Aircel, among others, is 'carefully examining its legal options' regarding as many as five key policy decisions linked to the airwaves sale, said Rajan Mathews, director-general of the Cellular Operators Association of India (COAI). These include 'discrimination' in terms of payment for airwaves secured in the auctions and spectrum usage charge between GSM and CDMA companies, Mathews said.  It is learnt that Idea Cellular plans to approach the courts separately over the government's decision to limit the spectrum sale to a maximum of 13.75 MHz in every region, which raises the possibility of only two mobile phone companies winning back their cancelled permits. The Supreme Court had quashed licences of nine operators in February and directed the government to issue fresh permits through an auction.  "There cannot be any diversion of spectrum. Restriction of the airwaves sale to a maximum of 13.75 MHz is illegal and contempt of the SC order. The same quantum of airwaves that was vacated has to be resold. But so far, the government's decisions contradict the spirit of the SC order," said an executive close to Idea Cellular. The company is planning to challenge the government's move to restrict the sale of airwaves.  The executive close to Idea said the astronomically high reserve price of . 14,000 crore for 5 MHz of GSM airwaves, finalised by the government last week, would drive many potential participants away from the auction.  "The Supreme Court had asked the government to award airwaves on the same lines as that of the 3G spectrum sale in 2010. Companies whose licences were quashed, and those that were prevented from getting permits in 2008, as well as existing telcos can all bid. But the high reserve price will prevent this from happening," this executive added. In Constant State of Upheaval  Vodafone has also protested the government's move to charge a fee for allowing operators to offer 3G services on existing 2G spectrum or 4G services on 3G airwaves.  The company has said the existing licensing provisions are technology neutral. "Any attempt to unilaterally amend the technology neutrality, already liberalised spectrum, enshrined in the Agreement may constitute an arbitrary and illegal auction. Also, any further decision that is contrary to this well-entrenched principle will be equally arbitrary, illegal and bad in law," the company said in an August 2 communication to the government.  The telecom sector has been in a constant state of upheaval since sector regulator Trai unveiled its recommendations on the sale of airwaves a few months ago. Most telcos had vigorously opposed these proposals, and while the government has diluted some of them, it has not dramatically altered them. This has left telecom companies with little choice but to pursue legal action.  According to COAI, the government had failed to offer a level playing field when approving the proposal to let telcos stagger the payment for airwaves bagged through auctions. "Telcos on the GSM platform have to pay 33% up front while for operators on the CDMA platform it is only 25%," said Mathews of COAI.  The industry body has also said GSM players were a victim of a 'discriminatory spectrum usage regime'.  "The Cabinet's decision (on Friday) of continuing the slab-wise system for spectrum usage is unfair and will lead to continuation of the non-level playing field within the industry. COAI would again like to highlight that the dual spectrum operators are paying separate spectrum charges for 800 MHz and 1800 MHz despite the Trai recommendations of 2007; thereby enjoying a lower charge and causing significant losses to the exchequer," the industry body said.  COAI is of the view that the government cannot go ahead with the auctions before taking a decision on whether the GSM permits of Tata Teleservices and Reliance Communications are to be quashed. The industry body has already approached the Supreme Court on this issue.