Uninor plea should make Kapil 'Zero-loss' Sibal, Raja happy

Uninor’s 2G review petition in the Supreme Court, which has rediscovered five documents that have already been in the public domain for several months now, is likely to be a source of major embarrassment for both the Prime Minister’s Office (PMO) and Home Minister P Chidambaram, who was finance minister when Andimuthu Raja allotted telecom licences in 2008.

But in what will warm the cockles of Kapil Sibal’s and Raja’s hearts, Uninor’s petition seems to back the present and former Communications Ministers’ zero-revenue-loss theory while suggesting that Raja’s alleged manipulation of the cutoff dates for licence allocation had no material impact since all licensees got start-up spectrum at the same rate.

The five documents, says Uninor, a joint venture majority owned by Norwegian Telenor, allegedly show that Manmohan singh, Chidambaram and Raja were agreed on the pricing of ‘start-up’ spectrum to Unitech, Telenor’s partner. Uninor is seeking the restoration of its 22 licences cancelled by the court’s 2 February verdict.

Uninor’s new defence is simple: the government of India had consciously decided not to put start-up spectrum for auction before issuing telecom licences in February 2008.

The ’new’ documents show that Singh, Chidambaram and Raja were consistent on the pricing of ‘start-up’ spectrum at rates fixed in 2001. Thus there were no losses, and the alleged manipulation of the first-cum-first-served principle by Raja was irrelevant since the price was known to every player in the telecom industry.

These ’new’ documents include a note (dated 6 January 2008) by Pulok Chatterjee, Prime Minister Manmohan Singh’s Principal Secretary, a note (15 January 2008) by Chidambaram, a note (dated 30 January 2008) by then Finance Secretary D Subbarao (now RBI governor), a document dated 4 July 2008 from the Department of Economic Affairs titled ‘Spectrum Issues – Update’ and an office memorandum dated 25 March 2011 from the Department of Economic Affairs prepared for the attention of the PMO.

The documents were earlier reported in the media, but Uninor’s review petition has forwarded a ’new interpretation’ on their import. The petition says: “…it is not known why the GoI (government of India) did not place these materials before this honourable court during the hearing of the matter. These materials go, amongst others, to the root of the finding of this honourable court that the ministry of finance did not approve the entry fee of Rs 1,658 crore for the 2008 licences and the start-up spectrum offered within such entry fee,’’ says the review petition.

The telecom ministry had consulted the ministry of finance, which finally agreed, “after due application of mind, that start-up spectrum of 4.4 Mhz would be allotted as part of the entry fee of Rs 1,658 crore which was to remain unchanged and auction-based pricing was to be applied only to additional spectrum in excess of 4.4 Mhz, whether given to new licence holders or existing licence holders.’’

Uninor’s petition quotes the following documents to prove its point:

• Pulok Chatterji’s note (6 January 2008) says “new operators may be allotted spectrum only up to the threshold level on payment of normal fees.’’

• Chidambaram’s note (15 January 2008) for the Prime Minister says “start-up spectrum is allocated as part of the licence. Initial allotment is upto 4.4+4.4 Mhz for TDMA-based systems and upto 2.5+2.5 Mhz for CDMA-based systems. It is also provided that additional spectrum may be considered after ensuring optimal and efficient utilisation of spectrum allocated.’’

• Then Finance Secretary D Subbarao’s note (30 January 2008) titled ‘Allocation and Pricing of the Spectrum’ says “Minister for Communication (A Raja) met Minister of Finance (P Chidambaram) today on the subject of spectrum charges. The FM said that for now we are not seeking to revisit the current regime for entry fee or revenue share.’’

• Department of Economic Affairs’ document (4 July 2008) titled ‘Spectrum Issues – Update’ has this to say: “However, due to historical legacy reasons, spectrum allocations upto 6.2 Mhz for GSM (5 Mhz for CDMA) shall not be charged both from new and existing operators.

• DEA’s office memorandum (25 March 2011) says that “the DoT response of November 29, 2007, was brought to the notice of the then Finance Minister on 09.01.2008, along with suggestions to argue for revision of the entry fee and adoption of auction with spectrum usage charges as the bid parameter. The fact that a Telecom Commission meeting on the issue was scheduled on January 15, 2008, was also mentioned. No response, however, was sent by DEA to DoT either on the issue raised by DoT in the communication dated November 29, 2007, or with reference to the impending meeting of the Telecom Commission; no interventions on entry fee were suggested in this meeting by DEA representatives and finally a note was sent by the then Finance Minister to the Prime Minister on January 15, 2008, wherein auction of spectrum was argued but only with reference to spectrum beyond the start-up spectrum. The licences allotted in 2007 and 2008 only carried the start-up spectrum. The note of the Finance Minister did not deal with the need, if any, to revise entry fee or the rate of revenue share. The issue of revision of entry was subsequently taken up by the MoF on November 11, 2008.”

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This note is likely to be embarrassing to Chidambaram, since it seems his ministry did nothing to suggest auction or stop Raja from issuing his licences at the old rates.

These documents, the review petition claims, “demonstrate deliberations at different levels of the government of India regarding the price at which start-up spectrum (which is the only spectrum given to the 2008 liceneces) was to be given.’’ And there was a consensus on pricing of start-up spectrum between the PMO, the finance ministry and the DoT in January 2008 (prior to the issue of the licences in end-February 2008).

Thus, the review petition alleges, the Supreme Court was not correct to say that the finance ministry was not consulted or was kept out of the loop in the matter of pricing of spectrum before the licences were issued.

And against this backdrop, Uninor’s petition argues that Raja’s alleged manipulation of the first-cum-first-served date doesn’t matter. The manipulation of the cutoff date would not have caused any loss to the public exchequer. At best, it could have changed the priority list. Since it happened much before the present management of Uninor came into the scene, how can the present management be asked to pay such a heavy price?

The Uninor petition warns about what may happen to one of the 10 top telecom companies if the Supreme Court’s order of cancellation of telecom licences is implemented. Nearly Rs 15,000 crore invested in creating an infrastructure to serve 40 million subscribers will go waste. There will be a “loss of employment and entrepreneurial opportunities to around 4,053 employees, 5,962 partner employees and 2,000 distributors and other channel partners and sudden loss of service to 40 million subscribers.’’

The Supreme Court, in its judgment, had directed the government to cancel 122 telecom licences and re-auction them in four months. So far, the government, Shyam Siesta, Videocon, Tata and Uninor have filed their respective review petitions in the case.