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Business News/ Politics / Policy/  Supreme Court says spectrum auction is subject to its final verdict
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Supreme Court says spectrum auction is subject to its final verdict

Court considering several challenges to tender conditions set by central government for spectrum auction that will begin on 4 March

One of the challenges relates to imposition of bidding minimum of 5MHz for those whose licence is expiring this year. Photo: Mint (Mint)Premium
One of the challenges relates to imposition of bidding minimum of 5MHz for those whose licence is expiring this year. Photo: Mint
(Mint)

New Delhi: The Supreme Court on Thursday said the outcome of the telecom spectrum auction starting next month will be subject to the court’s final ruling on the issue, increasing the uncertainty surrounding the auction process.

The court is considering several challenges to the tender conditions set by the central government for the spectrum auction that will begin on 4 March. One of them is an appeal by the central government against a Tripura high court order that had allowed Bharti Hexacom Ltd and Reliance Telecom Ltd to place bids of 4.4 megahertz (MHz) of spectrum, instead of the minimum 5MHz requirement set by the government for the March auction. The Supreme Court has extended a stay on the high court order.

“We’ll say let the auction take place and see what the result is. Let’s see how it works out," the court said. The court will next hear the case on 26 March.

The court’s final decision may potentially upend the bidding strategies of several telecom operators who are likely to participate in the auction based on the rules set by the government. In their legal challenges, the telecom operators had cited several examples of how the tender conditions could drive out competition.

“I don’t think there will be any impact on auctions. A lot of the arguments were made based on hypothetical situations. The court didn’t think it was appropriate to base it on hypotheticals. In a sub judice (dispute under litigation) case, the result is always subject to the court’s orders. We hope that the auctions go on smoothly. Any issues can be ironed out later," said attorney general Mukul Rohatgi.

A bench of justices Dipak Misra and A.K. Goel also formally transferred pleas pending before three high courts—Allahabad, Delhi and Karnataka—to itself. On 25 February, the court had already agreed to hear the arguments from these telecom service providers—Idea Cellular Ltd, Sistema Shyam TeleServices Ltd, Reliance Telecom and Bharti Airtel Ltd. It directed that none of the high courts will proceed with the writ petitions. It further said that while the auction was to continue according to its schedule, nothing would be finalized without the court’s permission.

The court also included in its order the clause that successful bidders would not claim any rights over the spectrum they won without the court’s permission.

Bharti Airtel, Sistema’s MTS and Idea declined to comment on the development.

While the telecom service providers were seeking to defer the auctions by a few days, the court made it clear that it would not temporarily stop the auction.

“We won’t stay the auction," judge Misra said. “Let’s get out of this individualistic mindset," he said in an open court. Since spectrum is a valuable natural resource, he said that there had to be careful understanding of the issues raised, like wastage of spectrum. He was referring to the plea made by telcos that there was a chance that spectrum could be wasted because of the minimum requirement of 5MHz. Attorney general Rohatgi told the court that of the 8.8MHz available in the Northeast circle, any remaining spectrum could be used by existing licensees with 4.4MHz to reach the requirement of 5MHz.

“What the order does is it injects a level of uncertainty in the auction process as the bidders will not know the outcome until they touch base with the Supreme Court. But it is not going to dampen the enthusiasm for them to bid. They will go by the strategy they had originally planned," said Rajan Mathews, director general of the industry body Cellular Operators Association of India (COAI).

“None of the operators asked the court to interfere in the auction process. We only sought clarifications on certain issues with the tender conditions. What is positive from the operators’ perspective is that the court has agreed to hear them. This indicates that the court sees merit in the operators’ case. The only question is it increases the uncertainty at this point," Mathews added.

The telcos claimed that there were issues regarding the tender conditions specific to certain circles, which required the court’s consideration.

The court has asked the government to explain how a topping up option for existing licence holders would work. The query came as some existing licence holders with 4.4MHz with 2-3 years remaining will top up with 0.6MHz spectrum in the auction to reach 5MHz. The 0.6MHz spectrum will be obtained for a period of 20 years, while a major chunk of the spectrum will go back to the common pool after the licence expires. The court asked if the 0.6MHz spectrum would, then, also cease to belong to the successful bidder.

Rohatgi, however, told the court that since the spectrum was won for a 20-year period, it would remain with the bidder; however, he would have the option of trading it. The court was not convinced with the trading aspect as it would be “private trading". The court said that the validity of the top-up spectrum ought to be for the same period as the bigger chunk of the spectrum, and asked the government to clarify on this issue.

The court also asked if it could make changes in the tender conditions. “As a constitutional court, if we start staying a particular provision (of the tender), it is not right," justice Misra said. “If the policy is inconsistent, then role of the court becomes more significant."

According to lawyers for Bharti Hexacom and Reliance Telecom—P. Chidambaram and Abhishek Manu Singhvi—the court could intervene if the terms were “irrational" and “unreasonable". It was their contention that the tender conditions were set to ensure that one of the bidders would get knocked out. Idea’s lawyer Rakesh Dwivedi said that in the Uttar Pradesh (West) circle, only Idea’s licence was expiring, and it had to compete with Vodafone, who would only have to bid for smaller blocks of 0.6MHz. “The whole clause is tailored to suit someone who has a existing business. For the same product, one person is bidding for 0.6 and the price to be matched by me is four times," Dwivedi said.

Shauvik Ghosh contributed to this story.

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Published: 26 Feb 2015, 02:43 PM IST
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