SC rejects telco pleas: What next for foreign investors?

The Supreme Court’s rejection of the pleas of seven telecom companies to review its 2 February order cancelling 122 licenses is a clear sign that the court is in no mood to humour telecom companies over the issue.

The ruling kills almost all hopes of these companies getting back their licenses through legal appeals, and leaves just one last legal resort- a curative petition, through which they could again ask the court to reconsider the order. The seven companies who filed pleas are Tata Tele, Idea, Uninor, SSTL, Videocon, S-Tel and Etisalat. Loop Telecom did not file a review petition.

In addition, the court postponed hearing the Indian government’s petition to review parts of the order to 13 April.

According to a Wall Street Journal report, Unitech Wireless, a joint venture between Norway’s Telenor and Unitech, said it will file a curative petition, while Sistema Shyam (a joint venture between Russia’s Sistema and Shyam Telecom) said it is “in the process of deliberating its future course of legal actions.”

The Supreme Court cancelled the licences in February (awarded in 2008) after it found irregularities in the way the licenses were awarded.

The cancellation of the 122 licences also puts billions of dollars invested by foreign companies at risk. UAE’s Etisalat and Bahrain’s Batelco (whose Indian partner is S-Tel) have already said they are shutting down operations in India.

Earlier, Telenor said it would seek compensation from the government if the license issue is not resolved, while Sistema has threatened to resort to international arbitration. Telenor’s Indian venture stands to lose all its 22 licenses, while the Sistema-Shyam Telecom combine will lose all but one of its permits.

In addition, the apex court’s order firmly places the onus of fixing the fallout of the 2G licence cancellations on the government.

In its earlier judgement, the Supreme Court had directed the government to revoke the licenses by June and conduct a new spectrum auction to reallocate the licenses. The timing of that auction, however, remains unclear even as the June deadline approaches.

All seven companies whose licenses were cancelled have to participate in auctions if they want to continue their mobile operations in India.

The court’s decision is certain to cause more disappointment among foreign investors, who are currently under attack from a host of measures that seem designed to make investing in India extremely taxing and difficult.