Mint Explainer: Who owns India's telecom spectrum?

The court’s decision will be significant as it will provide clarity on whether telecom spectrum — a natural resource and thus Constitutionally recognised as belonging to the citizens of India, with the government acting as a trustee — can be liquidated under the IBC for lenders to recover their dues. The ruling thus has implications for lenders, the government, and the future of India’s defunct telcos.

Let’s take a closer look.

What is telecom spectrum and why is there a tug-of-war over it?

Telecom spectrum is the invisible radio highway that wireless devices use to send and receive signals, which is divided into specific frequencies and sold by the government to companies to provide mobile and internet services. These airwaves determine the type and quality of connectivity between consumers and enterprises, and form the backbone of the telecom industry.

Banks that lend to telecom companies use these airwaves as security against loans. The telecom department calls them the most crucial asset of operators. There is thus a tug-of-war between the government, banks, and asset reconstruction firms on who actually owns the spectrum, and what happens to it when a telco is unable to pay its dues and goes bankrupt.

How and when is spectrum allotted?

The government auctions spectrum to ensure fair competition and efficient use of airwaves, and to generate revenue for itself. In the September 2021 reforms, the Union cabinet approved a proposal to conduct spectrum auctions annually. “Spectrum auctions to be normally held in the last quarter of every financial year," the government said in a release dated 15 September 2021.

However, after these reforms, the spectrum auction schedule went haywire. The 5G spectrum auctions for 2022 were held in July, no auctions were held in calendar year 2023, and in 2024 the government conducted auctions in June. After giving auctions a miss in 2023, the government collected ₹11,340.78 crore — the third-lowest sum since competitive bidding began in 2010 — in the 2024 auction.

In May, Mint reported that the Centre was unlikely to conduct a spectrum auction in 2025, citing two government officials and industry executives aware of the matter. The reason? India’s three telecom operators were not inclined to buy more spectrum this year after spending vast amounts in previous auctions, the sources said.

Why is the telecom department refusing to budge?

Three telcos – RCom, Aircel and Videocon – went bankrupt over 2018 and 2019, leaving behind unpaid statutory dues of over ₹40,000 crore. The telecom department highlighted in various appellate and insolvency courts that spectrum was a national asset leased by the government, and that unless statutory dues were paid, it couldn’t be transferred to a third party.

However, the department has managed to recover very little as an operational creditor. For instance, according to Aircel's resolution plan, approved by an insolvency court in June 2020, operational creditors including the telecom department were provided just ₹28.50 crore – a mere 0.16% of the ₹17,462 crore they had claimed. This is why the telecom department has refused to budge from its stance.

What have the banks said?

State Bank of India, one of the biggest lenders to both Rcom and Aircel, has exposure of ₹12,000 crore in the two telcos. Last Wednesday SBI told the Supreme Court that telecom spectrum should be treated as part of the insolvency process and sold to recover dues, setting up a direct clash with the government. The bank argued that spectrum was an intangible asset that could thus be monetised to recover dues.

SBI isn’t the only bank in this position. When RCom went bust in 2019, more than 53 financial lenders had raised claims of about ₹57,382 crore. Lenders to Aircel and its units include SBI, Bank of Baroda, Punjab National Bank, China Development Bank Corp and Canara Bank.

What will happen to asset reconstruction companies’ plans?

UV Asset Reconstruction Co Ltd (UVARCL), an asset reconstruction company, had won the bid for defunct telcos Aircel and RCom and its unit Reliance Telecom. Financial creditors who had claimed dues of ₹58,795 crore from Aircel and its entities Dishnet Wireless and Aircel Cellular Ltd were to get ₹6,630 crore under the UVARCL resolution plan, implying a haircut of 89%.

UVARCL had originally estimated that it would generate ₹800-1,300 crore by selling Aircel’s spectrum in the 1,800 MHz and 2,100 MHz bands. But these estimates came into question after the department made it clear that airwaves were only to be leased by the government and not sold. If the issue is not resolved quickly, the long waiting period will hamper the quality of the telecom firm’s assets, leaving all stakeholders at a loss.