New Delhi:Vodafone Group Plc’s tax dispute with the Indian government and the cancellation of 2G spectrum licences granted to nine other companies have dominated news about phone companies in recent months.
Less high profile has been Qualcomm Inc., which won broadband wireless access (BWA) spectrum in the 2010 spectrum auction and has still not received the promised spectrum from the Indian government.
If that is not enough, the department of telecommunications (DoT) is now looking at docking the company at least 18 months of the 20-year validity of the spectrum that the operator is to receive, saying the company was responsible for the delay.
“We are looking into the matter. A final decision has not been made as yet,” a senior DoT official, said requesting anonymity.
In the auction that concluded on 12 June 2010, US-based Qualcomm won BWA spectrum in four circles—Delhi, Mumbai, Haryana and Kerala—for Rs 4,912 crore. Infotel Broadband Services Pvt. Ltd, subsequently purchased by Reliance Industries Ltd (RIL) and renamed Reliance Infotel Ltd, was the only company that got spectrum across the country after bidding Rs 12,847.77 crore.
Qualcomm paid its winning bid amount on 21 June 2010, and had three months to apply for an Internet service provider (ISP) licence after the auction concluded, which it did on 9 August 2010.
As per the notice inviting applications (NIA) rules, the company was issued letters of intent (LoI) after paying, signifying that spectrum would be allotted to it as soon as possible, by the wireless planning and coordination (WPC) wing of DoT.
NIA is a DoT document that sets out the spectrum auction rules.
In November 2010, DoT sent the company a letter asking for clarifications regarding its application. That was replied to within a month’s time, by 20 December 2010. On 20 January 2011, Qualcomm received the required approval of the Foreign Investment Promotion Board (FIPB) for the 74% foreign direct investment (FDI) it held in the four companies that it had formed, one for each circle where it had won spectrum.
Some nine months later, on 20 September 2011, DoT rejected the company’s application for licences on the grounds that it had applied after the stipulated deadline and that it had applied as four separate companies and not one, as it was expected to. Interestingly, Qualcomm had written to DoT on 5 September 2011 (two weeks earlier), saying it had followed all the necessary rules stipulated in the NIA and that the company was willing to apply as a single company, as DoT expected. The NIA clearly states that the winning operator has to apply for ‘A’ category ISP licences for pan-India operations, which Qualcomm’s four different companies did individually.
In November 2011, DoT raised a demand for Rs 146 crore in dues and penalties on Tulip Telecom Ltd that holds a 13% stake in Qualcomm India, the entity that resulted after the four units were consolidated. One of the conditions for obtaining the ISP licence is that all stakeholders in the applicant company must have cleared all dues. A month later, in January 2012, Qualcomm offered to pay these dues, which were subsequently raised by Rs 264 crore to Rs 410 crore in February. Tulip Telecom is disputing these dues in the Telecom Disputes Settlement and Appellate Tribunal (TDSAT).
Global Holding Corp. (GHC), which is part of mobile tower company GTL Infrastructure Ltd, holds a 13% stake in Qualcomm India.
According to an executive with knowledge of the issue, Tulip Telecom was initially a manufacturing firm that applied for and received an ISP licence in 2005. In 2009, DoT carried out an audit on Tulip and found that the company was not including revenue from its manufacturing business in adjusted gross revenue (AGR), a percentage of which operators pay the government as a licence fee.
“At around the time Qualcomm applied for licences, the DoT did an assessment of Tulip’s books and found that they owed even more money. The earlier dues were only for 2009-10 and 2010-11, but the new notice included dues from 2005 as well as penalties which Qualcomm paid on 7 March,” he said. “They (Tulip) are still contesting the issue as it would mean a huge payout as long as the company’s ISP licence is valid.”
TDSAT, on 5 March, ruled that Qualcomm should be allocated the licence and the spectrum under clause 4.6 of the NIA, which says that once an operator receives the necessary licences, “DoT shall assign the specified spectrum”.
“We hope and trust that keeping in view the fact that DoT in this case has not adopted any adversorial approach, the applications for allocation of spectrum filed by the petitioner shall be considered and disposed of as expeditiously as possible,” TDSAT said in its ruling.
Interestingly, the NIA does not stipulate any particular penal provisions other than a case for revocation. Even for minor infractions, the NIA does not speak of cutting the validity period. While the universal access service licence (UASL, the umbrella telecom licence) contains a Rs 50 crore penalty clause, the ISP ‘A’ category licence has a Rs 1 crore penalty clause. However, in this case, Qualcomm had not received its licences and therefore couldn’t be covered under the rules.
“In case of less serious breaches, the government may impose penalties at its discretion. Seriousness of the breach shall be determined by the government at its sole discretion,” according to the NIA. In most cases of violation, the government imposes a financial penalty.
“It is unprecedented and completely uncalled for. There is no ostensible reason for doing it. It is particularly worrying as even after the TDSAT ruling, the government is thinking of doing something like this,” said Mahesh Uppal, a telecom regulatory expert and director with telecom consulting firm ComFirst (India) Pvt. Ltd. “The other operators should not be complaining of the extra few years as they have a first-mover advantage due to the delays,” he added.
On 15 March, Qualcomm was issued the necessary licences, and then on 21 March, the company applied for the spectrum. The firm is yet to receive any spectrum.
Interestingly, Augere, the only other foreign operator that won spectrum in the auction, got its licences and spectrum on 27 May 2011. Augere holds a 49% stake in its Indian entities (meaning automatic FIPB approval), while Qualcomm holds a 74% stake. No penalty has been imposed on Augere or any other BWA spectrum bidder. The other operators, including Bharti Airtel Ltd, Aircel and Reliance Infotel, already had the necessary licences and received their spectrum well within the three-month period set out in the NIA.
The cut in the validity is being justified in more ways than one. According to a DoT official, who didn’t want to be named, the spectrum allotted to the other operators will be valid until 2030, while if Qualcomm is allotted spectrum now, then it will be valid for almost two years more than the other operators.