India - What's $10-15 bn between friends?

Sunil Jain

So far, most of those horrified by the dramatic evidence that surfaced last week of Telecom Minister A Raja’s largesse on 2G spectrum costing the nation $10bn (that on 3G will probably cost another $5bn) have comforted themselves with one thought: Maybe the Telecom Dispute Settlement and Appellate Tribunal (TDSAT), which is hearing the case, will conclude the policy changes were illegal and smacked of favouritism. Swan Telecom, it is true, has been able to get $900 mn for 45 per cent of the licence it paid just Rs 1,537 crore for (since this is an increased valuation of 5.9 times, this means that instead of getting Rs 9,000 crore for all the licences sold, the government could have got Rs 53,000 crore). But if the process by which it got the licence last February is illegal, then the licence itself will be cancelled. While the case is being heard by the TDSAT, a recent Delhi high court judgment on the case has dealt a huge blow to it. Indeed, one of the respondents in the case, Reliance Communications, has already asked the TDSAT to dismiss the case since the Delhi high court has dismissed the case by the Cellular Operators Association of India (COAI).

For the record, the COAI challenged the October 2007 change in policy on various grounds and, when it looked as if the government was going to grant the spectrum to new licensees including Reliance Communications, which had been granted GSM-mobile spectrum on the CDMA-mobile spectrum licence it held, it asked the TDSAT for a stay. Since the TDSAT didn’t grant it, the COAI saw a possibility of the 2001 events repeating themselves — at that time, Reliance began offering illegal CDMA-mobile services and got so many subscribers, the government used this to justify legalising it. So, last December, the COAI went to the Delhi high court for a stay. While rejecting the plea for the stay and saying the merits of the policy would be decided by the TDSAT, the court came up with some findings which actually infringe upon the TDSAT’s jurisdiction.
To put in a little background here, the idea behind creating specialist regulatory and appellate bodies was that the laws governing various sectors were so complex, it was best to get specialists to handle them — which is why, for instance, the TDSAT has a specialist member with telecom knowledge. The way it was structured, the TDSAT hears all cases, if there was an appeal against this, it would go to the Supreme Court — even here, the Court wouldn’t really go into the facts of the case. In the celebrated Reliance CDMA-case in December 2002, after hearing the COAI appeal, the Supreme Court still never heard the case on merits, but asked the TDSAT to examine each of the issues raised in detail. (The reason why, last December, the COAI went to the Delhi High Court for the stay was that, under the law, only a final order of the TDSAT can be appealed in the Supreme Court.)
It is the Delhi high court’s findings that are the subject of this column. Since the crux of the COAI case was that the October 2007 policy changes were illegal, anything that knocks this argument finishes off its case completely. This is what the court has done. So, the court says, for instance, that once the “technology neutrality” policy was announced in 1999, mobile service providers were free to use either GSM or CDMA technology. The court then moved on to Telecom Regulatory Authority of India (Trai) recommendations of August 2007 and cited them to argue the same point — that there was nothing that prevented GSM-mobile players from using CDMA technology and vice versa. The court even cited an October 2003 Cabinet decision as saying this — indeed, the court said all that Raja did in October 2007, was to implement this decision.
Most of this, however, misses the point. So, for instance, while talking of the September 1999 “technology neutrality” policy, the court doesn’t mention that COAI members who use GSM technology asked the government for CDMA spectrum as well under the new policy. They were told they couldn’t get it since, under the policy, they could get only one of either GSM or CDMA spectrum. Ditto for the October 2003 Cabinet decision which legalised Reliance’s illegal CDMA-mobile services by creating a new licence called Unified Access Service Licence (UASL) — the licence clearly said users would get GSM or CDMA spectrum. Indeed, if matters were decided way back in 1999, why did the government ask Trai in April last year if CDMA firms could be given GSM spectrum (and vice versa) in addition on their existing licences?
And when Trai said it was indeed possible to do so, it qualified this in many ways. First, it said the UASL licences of firms like Reliance had to be amended, with or being replaced by and. But since the policy was changed in 2007, how could the government accept Reliance’s application for GSM spectrum, which was filed way back in 2006? Indeed, had the government dealt with the valid applications for more spectrum from the existing COAI members before the new policy of October 2007 was announced, there wouldn’t even have been any spare spectrum to give to firms like Reliance and Swan.
Instead of dealing with these issues, however, the high court has gone and muddied the waters by stating as facts matters that are deeply contentious and are, in fact, the very subject of appeal. Hardly surprising then that the high court judgment is now serving as the very basis of the challenge against the COAI.