DoT had imposed penalties for failure in timely roll-out of services.
In a major relief to new operators, telecom tribunal TDSAT on Friday set aside financial penalties imposed by the department of telecommunications (DoT) on them for not meeting roll-out obligations.
TDSAT also directed DoT to refund the penalty amount collected from the operators, with 12 per cent interest, within four weeks. It is estimated DoT has collected about Rs 350 crore from new players, including Unitech Wireless (Uninor), Etisalat DB, Sistema Videocon and Loop, along with old operators.
A TDSAT bench headed by Justice S B Sinha said DoT did not follow the “principles of natural justice” and did not give any opportunity to the operators before imposing a penalty or liquidated damages. (How the event unfolded)
The operators had filed nearly 70 petitions in TDSAT, challenging the liquidated damages imposed by DoT for various circles.
The tribunal also directed DoT to give a a fresh hearing to the operators. It said if there was any ambiguity in the licence terms, benefit had to be given in favour of the licensee.
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Uninor welcomed TDSAT’s order and said, “It was our contention the liquidated damages charged of us were unreasonable as they did not fully factor in the delays on the part of DoT in clearing our radio sites as well as the allocation of full spectrum. We had also protested the charges were levied unilaterally without us being given an opportunity to present our case.”
Another new player welcomed the directive and said its stand was vindicated.
Ernst & Young telecom analyst Amit Sachdeva said, “This is a positive sign, not only for the new players but also for the industry as a whole. When the government clears merger and acquisition norms, it will be easier for new players to go ahead with mergers as no liabilities or legal suits would be there.”
However, the valuation of new players would depend on their customer base and market share (very marginal currently). Analysts say the decision ensures new operators would not face the prospect of losing licences on the issue, as initially recommended by the regulator, Trai.
“With the fear of licence cancellation gone, possible buyers will not be afraid of coming forward as we have valuable spectrum,” said the director of one of the new operators.
According to the licence conditions, operators have to cover 10 per cent of the district headquarters in a telecom circle within the first year of spectrum allotment. On the expiry of another 52 weeks, after claiming liquidated damages, the licences can be cancelled in case services are not rolled out. All new players were allotted licences in 2008 under former communications and IT minister A Raja, now in judicial custody over his alleged role in the 2G spectrum scam.
Overuling the decision of the regulator recommending cancellation of 74 new 2G licences for operators’ failure to roll out services within the stipulated time, DoT had taken a more lenient view by only imposing a penalty.
The telecom department had initially asked Trai to reconsider its decision as it believed only 17 licences needed to be cancelled while for the rest a penalty was enough. Trai stood by its decision in 2010, asking DoT to cancel 43 licences. On the remaining 31 licencees, the regulator opined they only made technical roll-outs and could be considered for cancellation.
The operators took the matter to the TDSAT. Passing an interim order in this matter, the tribunal had earlier directed various operators to deposit 60 per cent of the liquidated damages.