In a much-anticipated judgment, the Supreme Court has ruled that the telecom licences issued by the United Progressive Alliance (UPA) government in 2008 are invalid. The overall implications of the judgment are not yet clear, but it is apparent from the information emerging so far that the government has been directed to begin the process of cancelling and reissuing the licences, which must conclude in four months. The Court has also directed the sector regulator, the Telecom Regulatory Authority of India or Trai, to come up with a fresh set of recommendations within two months; the government should auction the licences and associated spectrum a month after that. The Court deserves to be complimented for its verdict and indeed for doing what the government should have done long ago. This decision is also welcome in that it reiterates the principle that auctions, and the price-discovery mechanism that they incorporate, should be the default method of allocating national resources such as spectrum. The first-come, first-served principle for licensing, as the Court pointed out, is inherently discriminatory.
It is important for the government to take this judgment as an indication that it should move forward on cleaning up the telecom sector, which has been subject to the uncertainty brought on by accusations, policy incoherence and legal proceedings to do with licensing. It is also an opportunity for Telecom Minister Kapil Sibal, who had earlier said that no revenue was lost in the 2G licence controversy, to earn for the government the revenue it should in fact receive. The telecom sector has done well by the country in the past decade, pushing forward growth and connectivity. It continues to need sensible regulation and support from government policy, as its role going forward is in no way diminished. Broadband penetration continues to be a possible game-changer, and the subscriber base still has room to grow. Through the reallocation of idle spectrum, and the consolidation of the industry that will inevitably follow, the sector should be strengthened — if the government and the regulator take the right decisions transparently on the basis of sound commercial principles, and bring this messy and unpleasant episode to a close.
There continue to be questions that will require regulatory intervention. What of the subscribers to the operators whose licences have been cancelled? It is estimated that they are not more than seven per cent of the market, but that remains a large number. Is mobile number portability sufficient recompense? There is also the question of those companies – such as the Norwegian state operator Telenor, Abu Dhabi’s Etisalat and Russia’ Sistema – which invested in the licence-holding domestic companies. While it is incumbent on the government to ensure that the investment climate is not vitiated by this decision, the Court’s verdict is proof of the Indian system’s commitment to a clean and clear policy environment. It is also a lesson to businessmen that they should not cosy up to corrupt politicians to strike sweetheart deals. It is heartening that the Court has struck directly at such crony capitalism. Trai and the UPA have a great deal of work to do in cleaning up the mess of the past few years. The government has been late off the blocks; Trai recommended that most of these 122 licences be cancelled some time ago, but the government held off on doing so. The Supreme Court has done well to kick-start the process.
