Business - Death by default

Everyone knows that the country’s courts are so clogged that it takes years to get a case heard and so, often enough, by the time a verdict is delivered it’s irrelevant. Which is why, for instance, the Civil Procedure Code was amended in 2002 to make it mandatory that courts completed hearings of a case within a year — sadly, no time limit was set for judges to deliver their judgment! For consumer courts, a limit of six months was set to deliver a judgment and in the case of specialised tribunals like the one on telecom (TDSAT), a limit of 90 days was set [Section 14A(6)].

What is shocking, however, is that, despite this, the TDSAT continues to delay cases indefinitely. In the case this column is talking of, of Reliance Communications being awarded fresh spectrum under its CDMA-mobile licence to start offering GSM-mobile services, the government decision was challenged in the TDSAT more than nine months ago — the case has not even been heard fully while Reliance Communications is ready to start offering its services any day now! So even if a verdict says government policy was wrong, it will be irrelevant. The last time Reliance offered a service — CDMA-mobile — which was also under challenge, the TDSAT verdict against Reliance came so long after the service had started that the government argued Reliance had too many subscribers to be asked to shut operations. The result was a new licence was issued to legalise this in 2002!

Last October, the government decided to create a new category of applicants called “crossover technology” for the spectrum it decided to hand out at bargain-basement prices. This allowed Reliance to jump the queue for GSM-mobile spectrum and after Reliance paid the money, the government announced its policy! Since this smacked of bias, within days of this (see “Manmohan is not the Raja, I am,” 14-1-08), the Cellular Operators Association of India (COAI) appealed to the TDSAT saying the new policy was illegal. The TDSAT gave a stay but lifted it after a few months. An aggrieved COAI then went to the Delhi High Court for a stay — the case has been heard but the judgment is still awaited. Meanwhile, the TDSAT began hearing the case on the policy being illegal on July 29 and, after asking the government counsel to file an affidavit, has adjourned the next hearing to August 19.

Apart from the fact that this delay of over nine months is against the TDSAT Act, what’s interesting is that the very first telecom dispute before the first regulator — at that time the Telecom Regulatory Authority of India (Trai) acted as the appellate tribunal as well — was disposed of after daily hearings in 30 days. And if the TDSAT rules against government policy, and therefore Reliance, it’s likely the events of 2002 will repeat themselves.

Equally interesting is the composition of the TDSAT itself. As part of the consultation process for these new GSM-mobile licences last year, one of the questions (Question 15) Trai asked for responses on was “cross-over technology” — should a CDMA-mobile player be allowed to get GSM-mobile spectrum under the same licence — the very issue that is being challenged at the TDSAT today. One of the persons who gave his opinion was GD Gaiha, a former CMD of the government-owned Telecommunications Consultants India Limited. Gaiha said it should be allowed and, indeed, that even the law permitted it. Later, in response to another question (Question 17), Gaiha said “cross-over technology” firms should get priority over others while allocating the new spectrum. Whether Gaiha’s right about the law allowing CDMA-mobile firms to get GSM-mobile spectrum is of course something the TDSAT has to decide in the COAI case before it. But what chance does the COAI have if one of the members of the TDSAT is Gaiha, who already has a stated public position against what the COAI is arguing? By the way, in previous such cases at the TDSAT, such as the one about what constituted the revenue which had to be shared with the government, Vinod Vaish recused himself saying that he had taken a view on the matter when he was telecom secretary and it was this very view which was now being challenged.

Postscript: While the TDSAT grapples with how to deal with the issues just raised, the government/Trai needs to grapple with another. A Sell recommendation put out by Kotak Institutional Equities Research last month says the revenue numbers put out by Reliance Communications for the March 2008 quarter are 26 per cent lower than those reported by the company in its financial statements to shareholders — this difference was 4 per cent in the December 2006 quarter. As a result, while the licence fee payout for most competitors has risen, that for Reliance rose a lot less. While Reliance Communications’ spokesperson argues this is because the Trai numbers don’t take into account various revenue items such as those from its mobile internet business or its village phones, the Kotak report argues none of these is significant enough to explain the huge, and rising difference. Whether Kotak’s right or Reliance’s right, either way, this is something the government/Trai needs to examine and put out the findings in the public domain.