2G Trial: Industry says foreign investment will be hit

Mumbai: India Inc and analysts in the telecom industry see the cancellation of 122 telecom licences by the Supreme Court’s as a huge setback for the sector and for foreign investment in the country.

India’s Supreme Court today revoked 122 telecoms licences issued under a scandal-tainted 2008 sale in a judgement that could further darken the business climate in Asia’s third-largest economy.

Even as RCom said that the company will not be impacted by the Supreme Court’s verdict since all its licences were obtained by or before 2001 and Videocon too was of a similar view, Uninor - the Indian joint venture of Norway’s Telenor with Unitech - said it has been “unfairly treated” and “was shocked” after the Supreme Court’s verdict to scrap telecom licences.

Rishai Sahai, director at consultancy firm Cogence Advisors in New Delhi said this was terrible news forforeign investors. “It is very bad news. What mistake did they do?” he said of overseas investors like Telenor, adding, “They partnered with Indian companies, invested lots of money and followed the process of that time.”

Sahai said that the natural consolidation one would have expected to happen in the sector, which would have weeded out the weak players, is out of the way now.“This creates very bad impression about the government in the overseas markets,” he said.

Head of research at Mumbai’s SMC Investments and Advisors Ltd, Jagannadham Thunguntla, agreed with Sahai.

“Foreign players like Systema and Etisalat, which are government controlled companies… those governments will start feeling apprehensive about doing business in India and hence, drawing foreign direct investment would be little more challenging for the country,“Thunguntla said.

However he was of the view that big players like Bharti Airtel and Idea Cellular, which had strong balance sheets would be the beneficiaries of this verdict.

Citigroup too in a report has said that while the biggest losers will be new entrants like Swan, Uninor and Sistema, players like Bharti Airtel will be the biggest gainers, expecially since there has been no cancellation of licences for them.

Speaking to Firstpost, Prashant Bhushan, member of Team Anna, said the judgement would set a huge precedence in time to come. “It is a very very good salutary judgement and this judgment establishes a huge precedent for time to come… It establishes that no corporate group or any private entity can’t be benefited out of illegal deal or act,” he said.

In the case of Unitech and Swan, the Supreme Court has asked them to pay Rs 5 crore each as fine in this case.

Watch video: Telecom expert Mahesh Uppal says that the SC order in 2G case will bring more transparency in the allocation process.

With inputs from Reuters