ON August 18, 1993, in the Conference Hall of New Delhi’s Sanchar Bhawan, which housed the telecom ministry, the bids were opened for the first time to launch mobile services in four metros—Delhi, Mumbai, Kolkata, and Chennai. There were 14 companies in the fray, and eight, or two in each city with each one to get only one city, could grab the licences. The first 13 bids were along expected lines, some quoted high and some low. The last one that was opened was submitted by notorious businessman, C Sivasankaran.
Even before his document was opened, Sivasankaran jumped in the air, and shouted, “Nothing, nothing, nothing”. Unlike the others, he turned out to be the “joker” in the pack; his bid stated that he would charge “zero” rental from the mobile subscribers. As one of the subsequent licence-holder, who was present in the hall remembered with a stumped face, “We were shocked. We knew that this was impossible. The business was doomed from Day One.” This incident, in effect, tells the controversial, unfair, opaque, and irregular story of Indian mobile services in the past three decades. Moreover, Telcos were given a number of sops over the years.
The latest in the series of the sops that were doled out to the telecom companies (Telcos) was the recent Rs. 42,000 crore-bonanza. The government allowed the firms to defer their annual payments, which is a part of percentage of their revenues (adjusted gross revenues, or AGR) for up to two years. This was after the Supreme Court saddled the Telcos with whopping dues of Rs. 130,000-140,000 crore because of the unpaid revenue share. They included the past dues on account of annual licence fees and charges on spectrum usage, interest, penalties, and interest on penalties.
The latest in the series of the sops that were doled out to the telecom companies (Telcos) was the recent Rs. 42,000 crore-bonanza. The government allowed the firms to defer their annual payments, which is a part of percentage of their revenues (adjusted gross revenues, or AGR) for up to two years
Immediately, the two of the largest Telcos, Vodafone-Idea and Airtel, claimed that they couldn’t pay the dues. The two together had to cough up Rs. 83,000 crore by January 2020. They filed a review petition in the apex court. Vodafone-Idea said its losses had mounted to Rs. 50,000 crore because of the dues being reflected in its balance sheet. Airtel’s losses climbed to Rs. 23,000 crore because of the same reason. The former, in fact, publicly held that it would be bankrupt, if the SC insisted on the payments.
Not so subtly, the narrative shifted to two issues—the emergence of a near-monopoly in the telecom sector, and the related public, rather subscribers’, interest. If Vodafone-Idea went bust, and Airtel was part-paralyzed, Reliance Jio would be the only main player. The fourth player, the state-owned BSNL, was anyway in a fix and was merely limping along. Obviously, a monopoly would be against the interest of the consumers, who could be squeezed and forced to pay premium tariffs in the near future.
Reliance Jio, being the last entrant with its 4G and broadband services, had minimal dues. If it bought the bankrupt Reliance Communication, which it has bid for, it would have pay some money on its behalf. But backed by the rich coffers of the parent, Reliance Industries, which earned a net profit of almost Rs. 100 crore a day in 2018-19, was in a position to do so easily. Therefore, it unsuccessfully argued against any form of a bailout for the sector.
Indictment # 1
First Cellular Licenses, Delhi High Court, 1993
“If these and several other deficiencies of several bidders could be ignored or waived, there appears to be no reason why similar treatment could have been granted to M/s Hutchison Max Telecom. The write petition of M/s Hutchison Max Telecom (alleging that it was deliberately not given a licence)… has, therefore, to be allowed.”
If both these companies (Hutchison Max and India Telecomp), or either of the two come(s) in the select list on merit, then they or either of the two companies have (has) to be given their (its) due place.”
“Mandamus is, however, issued… to consider afresh grant of license to the petitioner (India Telecomp) after evaluating marks for rental on the basis that figures of deposits from subscribers given for Delhi and Bombay were cumulative, other things, however, remaining the same.”
THE monopoly argument was further bolstered by the huge investments that were required in the near future. The government is likely to auction 5G spectrum in the near future. The Telcos, if they have to survive, will need to bid huge sums to buy it. In addition, given the worsening quality of calls and data, they have to pump in huge sums in networks and infrastructure. Along with the SC dues, the combined outgo on these fronts was likely to push three out of the four players out of the telecom business.
Indictment # 2
First Cellular Licenses, Supreme Court, 1994
“As seen above, Tata Cellular was originally selected for Delhi. By implementation of the judgment of the Delhi High Court it has been left out. Before doing so, as rightly urged by Mr Soli Sorabjee, this appeal ought to have been heard. There, there is a clear violation of the principle of natural justice. On an overall view, we find it has two distinctive qualifications. In that
• It has not borrowed from any commercial bank
• It has an annual turnover from Indian parameters of Rs 12,000 crore and the annual turnover of the foreign parameters of Rs 51,000 crore.
Comparatively speaking, the other companies do not possess such high credentials yet it has been awarded low marks with regard to the reliance on Indian public financial institutions and financial strength of the parameters/partner companies. These qualifications could have been validly urged had it been heard. Thus, we do not know what decision could have been arrived at.”
“In the result, we hold that Bharti Cellular’s claim based on Talkland’s experience is incorrect. Talkland’s experience will have to be excluded. The matter will have to be reconsidered on a factual basis as on 20/1/1992, in the light of what we have observed. The claim of Tata Cellular will have to be reconsidered in the light of the above observations.”
Airtel and Vodafone-Idea also felt that the current policy regime was rusted and had to be changed. The first was because the SC calculations of AGR, on which revenue share was calculated on two counts (licence fee and spectrum usage), included non-business or non-mobile income such as dividends. This could not be fair, they maintained. The second was that after the spectrum auction regime kicked in since 2010, the Telcos paid high upfront money for spectrum allocation. Hence, it was unfair for them to pay additional annual fees as a percentage of their revenues.
Reliance Jio, being the last entrant with its 4G and broadband services, had minimal dues. If it bought the bankrupt Reliance Communication, which it has bid for, it would have pay some money on its behalf. But backed by the rich coffers of the parent, Reliance Industries, which earned a net profit of almost Rs. 100 crore a day in 2018-19, it was in a position to do so easily
Both these arguments are specious and non-maintainable. Past precedents prove that the exodus of telecom players does not affect consumers for more than a few weeks. For instance, the SC cancelled 122 mobile licences in the controversial 2G scam. Dozens of players instantly shifted from one service provider to the others. There was no crisis, although there was a shake-up. In the recent past, many others have shut down shops, and the subscribers have seamlessly shifted to the four existing players.
More importantly, the exit of Vodafone-Idea and Airtel will not entail a monopoly player, thanks to the 2016 insolvency code. The new bankruptcy allows for easier and faster resolutions of companies that go belly-up. Within a short time, the lenders, who can take companies to the National Company Law Tribunal (NCLT) to find solutions in case of loan defaults, can sell them to new buyers, or to the same managements. In such cases, which are time-bound by the law, the lenders can take huge haircuts too.
Indictment # 3
Wireless in local loop, TDSAT, Minority Order, 2003
“Could it be that Government can treat hat recommendation (of TRAI) as a scrap of paper and consign it to the waste paper basket? Certainly not. Otherwise also, Government will have to give reasons for not accepting the recommendations of the Authority (TRAI), even if we accept the argument…. Otherwise the Authority will look absolutely ineffective and its functions can as well be performed by any of the Departments of the Central Government. It is mandatory for the Authority to make recommendations either suo moto or on the request of the licensor, the Central Government.”
“This was indeed a shift in the approach of the Government when it accepted the recommendations dated 8/1/2001 of the Authority and by its decision made on 25/1/2001 permitted FSPs (fixed services) to offer WiLL(M) service. It has been mentioned that the decision to allow limited mobility to FSPs was no doubt taken with extraordinary speed of the decision-making process in the last fortnight of January 2001 when the Government does usually follow a more relaxed, meandering path. The majority order, however, did not impute any motive to the Government. There are certainly distinct features of the two services that are provided by CMSPs (cellular services) and FSPs and the Government also felt that two services are qualitatively different. On the question of the extent of mobility, TRAI held the extension of WiLL mobility only up to the local area….”
IN the past, large companies in sectors such as coal, steel, and telecom were forced to go to the NCLT. In a dozen cases, the Reserve Bank of India imposed tight deadlines on the lenders to find solutions. The new buyers are quickly able to get the companies on track. The same can happen with the telecom sector when Vodafone-Idea and Airtel are unable to pay their loans and are forced to declare insolvency. The RBI can intervene with tighter deadlines. In the process, consumers’ interest can be adequately protected.
According to several legal experts, in its judgment on revenue share, the apex court went through each component that comprised AGR in detail, and with a fine toothcomb. It provided a complete rationale on what should be included in the gross revenues, and why. Therefore, the Telcos’ analysis that certain component should not be included may be rejected in their review petition. The SC maintained that the definition of revenue was “broad, comprehensive, and inclusive”, and that there was no ambiguity in it.
More importantly, the service providers had accepted the definition “voluntarily and unconditionally”, and had agreed that they would not raise any disputes in the future. This is why non-business activities were included in the calculation of the AGR and the two fees. These are the reasoning that the Court gave for some of the specific revenues:
• Gains from foreign exchange fluctuations cannot be excluded because the definition of gross revenue included “any other miscellaneous revenue”, and forms a part of actual revenue
• Monetary gains on sale of shares have to be included because the definition implied that every amount that was more than the book value of the current assets and which is accrued by the service providers must be considered for the calculation
• Insurance claims on capital assets could not be excluded because if they were above the book value, they entailed an inflow of cash
• Income from interest and dividend, and interest on inter-corporate loans had to be included because it is explicitly mentioned in the definition of gross revenue
IN a similar vein, the distinction that the Telcos now seek to make between upfront spectrum payments and annual spectrum usage fees is full of flaws. For example, the auction amount paid is for the allocation of the spectrum. It gave the right to the telecom firms to get that spectrum from the government, which was duty-bound to provide it in a reasonable time. The spectrum usage fee is for the regular use to provide the services to the consumers. In a rough manner, this is akin to the fact that one pays to buy a house in a gated colony, and then pay regularly for maintenance and the use of other services.
Finally, the Telcos always have invariably maintained, as they did each time they wanted sops over the past three decades, that they had no money to cough up. Their businesses were in trouble, and incurred losses. Hence, the government had to help. This was not the case earlier, and this is definitely not the case today. For example, Bharti Group, with a market capitalisation of more than Rs. 200,000 crore for its two companies, Bharti Airtel and Bharti Infratel, can easily raise money to pay its dues. Vodafone-Idea is backed by its British parent, which has the necessary cash resources.
Indictment # 4
2G Scam, Supreme Court, 2012
“In conclusion we hold that the State is the legal owner of the natural resources (including scarce and finite spectrum) as a trustee of the people and although it is empowered to distribute the same, the process of distribution must be guided by the constitutional principles including the doctrine of equality and larger public good.”
“In our view, the recommendations made by TRAI in this regard were contrary to the decision of the Council of Ministers that the DoT shall discuss the issue of spectrum pricing with the Ministry of Finance along with the issue of incentive for efficient use of spectrum as well as disincentive for sub-optimal usages. Being an expert body, it was incumbent upon TRAI to make suitable recommendations even for the 2G bands especially in the light of the deficiencies of the present system which it had itself pointed out. We do not find merit in the reasoning of TRAI that the consideration of maintaining a level playing field prevented a realistic assessment of the entry fee.”
“There is a fundamental flaw in the first-come-first-served policy inasmuch as it involves an element of pure chance or accident. In matters involving award of contracts or grant of licence or permission to use public property, the invocation of first-come-first-served policy has inherently dangerous implications. Any person who has access to the power corridor at the highest or the lowest level may be able to obtain information from the Government files or the files of the agency/instrumentality of the State that a particular public property or asset is likely to be disposed of or a contract is likely to be awarded or a licence or permission is likely to be given, he would immediately make an application and would become entitled to stand first in the queue at the cost of all others who may have a better claim. This Court has repeatedly held that wherever a contract is to be awarded or a licence is to be given, the public authority must adopt a transparent and fair method for making selections so that all eligible persons get a fair opportunity of competition. To put it differently, the State and its agencies/instrumentalities must always adopt a rational method for disposal of public property and no attempt should be made to scuttle the claim of worthy 86 applicants. When it comes to alienation of scarce natural resources like spectrum etc, it is the burden of the State to ensure that a non-discriminatory method is adopted for distribution and alienation, which would necessarily result in protection of national/public interest. In our view, a duly publicised auction conducted fairly and impartially is perhaps the best method for discharging this burden and the methods like first-come-first-served when used for alienation of natural resources/public property are likely to be misused by unscrupulous people who are only interested in garnering maximum financial benefit and have no respect for the constitutional ethos and values.”
“In the result, the writ petitions are allowed in the following terms:
(i) The licences granted to the private respondents on or after 10.1.2008 pursuant to two press releases issued on 10.1.2008 and subsequent allocation of spectrum to the licensees are declared illegal and are quashed.
(ii) The above direction shall become operative after four months.
(iii) Keeping in view the decision taken by the Central Government in 2011, TRAI shall make fresh recommendations for grant of licence and allocation of spectrum in 2G band in 22 Service Areas by auction, as was done for allocation of spectrum in 3G band.
(iv) The Central Government shall consider the recommendations of TRAI and take appropriate decision within next one month and fresh licences be granted by auction.”
This behaviour is atrocious, to say the least. The important fact, as mentioned earlier, is that this is not the first attempt, but a sixth one, by the government to favour or bail out specific telecom firms. It was done in 1992-93, 1995, 1999, 2001-2002, 2005-08, and 2019 on various pretexts. But as past experiences proved, each time this was done, the Telcos took advantage of the new policies, and came back with a begging bowl again after a few years. There is no need to save any entrepreneur anymore.
Manipulation in bids (1992-93)
When the first technical tenders for mobile services in four cities were opened on March 30, 1992, 30 Indian companies, along with their foreign partners, submitted the bids. The Technical Evaluation Committee shortlisted 12, but stated that “four companies whose offers did not fully satisfied the criteria” be also recommended. This was the first nail in the mobile coffin. One of these four was BPL Mobile, which finally bagged the Mumbai licence, along with Hutchison Max. In fact, the story of BPL during the first bid exemplifies the various twists that the short-listing process took.
BPL had not submitted the name and details of its foreign collaborator(s) in its technical bid. The joint venture was registered a day after the documents were submitted. At this stage, BPL had several foreign partners, including a French one, which was changed in the financial bids. Competitors alleged that this resulted in a change in ownership, which “was not permissible”. They charged that BPL got the Mumbai licence because of “nepotism”. The son of BR Nair, a member of Telecom Commission, was employed with the BPL Group, then owned by the now Rajya Sabha MP, Rajeev Chandrasekhar.
Both these allegations were subsequently thrown out by the Supreme Court, and BPL did launch its mobile services in Mumbai, and later expanded in other parts of the country. Ironically, Chandrasekhar sold his stake in BPL Mobile to Essar group for more than a billion dollars in 2005. The billionaire ventured into other areas, including defence and media, and later entered the Upper House of Parliament. He retained his interest in telecom matters even after his exit and famously took on the Tata Group.
Another intriguing case was that of Sivasankaran, whose Sterling Cellular was shortlisted for a Delhi licence. It was then decided to reject the bid as the Indian partner, Sterling Computers, which he owned, was under CBI investigation. The Delhi High Court had passed “strictures” against the company in the MTNL telephone directories case. Rajesh Pilot, the telecom minister, overturned this. He said that Sterling Cellular “need not be excluded outright, since the CBI report has not yet been received”. Sterling Cellular was included in the “select list on a provisional basis”.
But Sterling Cellular was moved from Delhi to Chennai due to two reasons. One, its bid indicated that there would be “heavy foreign exchange outflow over three years if the company were to be allotted Bombay (Mumbai) or Delhi”. Two, any delay in the issue of licence because of CBI investigations, would be minimised if it was shifted to the smallest of the four cities. Any adverse impact on consumers due to the lack of competition—one service provider instead of two—would be the least in Chennai.
According to several legal experts, in its judgment on revenue share, the apex court went through each component that comprised AGR in detail, and with a fine toothcomb. It provided a complete rationale on what should be included in the gross revenues, and why. Therefore, the Telcos’ analysis that certain components should not be included may be rejected in their review petition
Moreover, in the Supreme Court, several petitioners, including Hutchison Max, which lost out, alleged that the marking system of the financial bids was “deliberately done to promote BPL from Delhi to Bombay (Mumbai), Tata Cellular from Calcutta to Delhi, and Usha Martin to Calcutta (Kolkata), its home territory”. The bid of India Telecom, which had asked for “exclusive” licence, although the tender specified two licences for each city, “stood rejected” up to October 9, 1992, but was “selected” the next day.
IN February 1993, the Delhi High Court rejected these charges. It did not find any “hidden criteria”, or that any criteria were laid down with the objective of “knocking out” some bidders. It upheld the fact that new considerations were included at the several stages of selection because these could not be “pre-determined”. Hence, they could not be disclosed to the bidders in advance, given that the selection was a “complex affair”. “The question of giving or denying benefits does not arise,” said the apex court.
However, it upheld the petition filed by Hutchison Max, and asked the telecom ministry to include it in the final list of the licence-holders. Its bid was rejected because of “non-compliance of operative and financial conditions”. The company had later accepted these conditions through a letter, and explained that the non-compliance was technical in nature and because of “typographical error”. The Court noted that the same errors existed in all the four tender documents that the company submitted for the various cities.
In a bizarre fashion, the inclusion of Hutchison Max had several ramifications. It got the Mumbai licence along with BPL. Bharti Cellular (now Bharti Airtel), which was in Mumbai, now shifted to Delhi, which implied that Tata Cellular was thrown out, as it had only bid in Mumbai and Delhi. Sivasankaran was comfortably, though not happily, ensconced in Chennai.
Adventurous, audacious bids
When Rajesh Pilot was shifted to Internal Security, Sukh Ram took over as the new telecom minister. He desperately wanted a hand in the lucrative mobile pie. He decided to introduce mobile services in other cities. Bids were, therefore, invited for 20 new circles, as the specific cities and adjoining areas were dubbed. This time, the most audacious bid came from an upstart, a little-known company, Himachal Futuristic, which was owned by Mahendra Nahata. He was the top bidder in nine out of the 20 circles.
Although, the company had an annual turnover of a mere Rs. 250 crore, its bid stated that it would pay an unbelievable Rs. 85,925 crore to the government for the nine licences. Everyone was stunned. According to a columnist, Swaminathan Aiyar, “Telecom experts were unanimous that HFCL (Himachal Futuristic) could never raise such an enormous sum, and expected that the company would forfeit its security deposit in circles where it could not do the job.” Most merchant bankers and investment bankers felt the same.
THIS time, Sukh Ram came to Nahata’s rescue. The officials went through the documents with a fine toothcomb and dug out a clause that was buried in the fine print. It stated that the DoT could restrict the number of circles that could be licensed to a single company. Hence, it rejected Himachal Futuristic’s nine circles, and restricted it to only three. The cap on licences, and to only three, was what the financial doctor had ordered. Nahata’s commitment was dramatically reduce by more than a third to Rs. 27,795 crore.
Indictment # 5
Adjusted Gross Revenue, Supreme Court, 2019
“The contractual definition of gross revenue is binding. This Court has observed that it was open for the licensee not to undertake activities for which they do not require licence under Section 4 of the Telegraph Act and transfer these activities to any other firm or company. However, they cannot avoid the consequences of the contractual definition which has been accepted by the parties, and they are bound to make payment of licence fee on the basis of gross revenue, which would be the total revenue of the licensing company. As the Government has not accepted the TRAI’s recommendations, the decision of the Central Government on the point of definition of adjusted gross revenue was final and binding. This Court has also held that TRAI and tribunal had no jurisdiction to decide on the validity of the definition of adjusted gross revenue under the licence agreement and to exclude certain items of revenue which were included in the definition of gross revenue in the licence agreement between the licensor and licensee. The tribunal had no jurisdiction to exclude certain items on the ground of the validity of the definition of adjusted gross revenue. The finding of the tribunal in the order dated 7.7.2006 insofar as it decided that the revenue realised by the licensee from activities beyond the licence to be excluded from adjusted gross revenue in the licence agreement is without jurisdiction and is a nullity.”
What was more surprising was that Himachal Futuristic was free to choose its three circles. It was not restricted to take the three where its bids were the highest. However, other bidders, like US West-BPL, “were forced to take only the highest-bid cellular circles”. The three-circle cap also allowed Himachal Futuristic sister concern, Fascel, got a cellular licence in Gujarat, although it was the third-highest bidder in that circle. The DoT also decided that the company did not have to forfeit the security deposit and guarantee for the six circles that it did not get because of the cap.
Years later, Nahata’s business clout became public. This was in May 2010, when Infotel, which was owned by Himachal Futuristic, emerged as the only company with an all-India licence to roll out 4G network. It paid almost Rs. 13,000 crore for the spectrum in an auction. Within a day, Infotel sold 95 per cent stake to Reliance Industries. Competitors charged that Infotel’s was the front for the latter. However, the tender documents omitted the general clause that the licence could not be sold, or the owners could not change.
By 1995, after two rounds of bids, it was clear that everyone had miscalculated the market potential. Growth was slow, tariffs were high, and the cost of the mobile instrument was enormous. Faced with huge outgo because of their bids, and continuous losses, the Telcos approached the government for help. But the decision was regularly postponed because of political instability. Eight telecom ministers—the late Atal Bihari Vajpayee was the minister for five times, which lasted from as short as one day (May 1996; April 1998) to just over four months (June-October 1999)—came and went between June 1996 and October 1999.
In 1999, when Ram Vilas Paswan was the minister, the government announced a new telecom policy. One of its major clauses related a shift from a licence fee regime to a revenue-share one. Henceforth, Telcos would need to pay a percentage of their AGRs as both licence fee and spectrum usage charges, which were the two important levies. This was a huge relief for the companies, as the outgoes depended on what they earned, and not fixed amounts that they had to pay every year, irrespective of their earnings.
BUT as we saw earlier, the huge relief was quickly turned into a burden when the Telcos contested what could or could not be included in the AGR. Finally, their contentions were demolished by the recent SC order, which rejected their arguments, and forced them to pay huge dues by January 2020.
If there’s WiLL, there’s a scam
Under the New Telecom Policy (NTP; 1999), there was a largely-unnoticed clause on limited mobility, or Wireless In Local Loop (WiLL). The justification that the fixed-line company, which provided the landlines that have largely vanished today, had serious issues with the last-mile connectivity. The connections from the local telephone exchange to the homes and offices involved digging, and right-of-way, to lay the copper wires. It was both costly, and resulted in delays due to permissions required from several agencies.
Hence, the landline operators were allowed to offer last-mile-connectivity, or links in local and limited areas, through wireless technology. This was taken to another level when, in January 2001, the telecom regulator, TRAI, issued its recommendations on limited mobility. Its press release clarified that WiLL “is not the same as Cellular Mobile Services, and that customers should not denied the benefits provided by technology”. It added that WiLL “is a by-product of Basic Service (landline)”. In just over two weeks, DoT agreed, and issued guidelines on mobility within a local area.
The ground shook beneath the feet of the mobile companies. They realised that WiLL could easily transcend the local area and stretch to an entire circle or city. A series of interconnected local loops, so to say, which intersected each other so that the signal was always there, could imply that the phone instrument could remain connected even as people traversed from one area to another. Since the instrument was wireless, if a smaller mobile phone was given to the users, WiLL became unlimited mobile.
Moreover, if the landline operators had licences in several circles, they could provide roaming services, i.e. ability to move around with mobiles using WiLL, across the country. The landlines could become truly mobile. The government justified it in terms of benefits to the poor and those from underprivileged socio-economic sections. It said that the growth in telecom was imperative for higher GDP growth, and higher productivity. Paswan maintained that there were enough safeguards to protect the cellular players.
Over time, several fixed landline operators became mobile ones. The most prominent among them was Reliance Telecom (later Reliance Communications). What is important is that WiLL enjoyed huge benefits over cellular. As the government said, and TRAI agreed, the former services were cheaper because they were charged at the fixed-line rates, rather than the higher cellular ones. In addition, the WiLL players had to pay lower licence fees compared to the mobile counterparts.
As the action heated up between cellular and WiLL a group on Telecom and IT Convergence, set up by Prime Minister Vajpayee, reached a compromise. It restricted WiLL to the “local calling area”. But the DoT agreed with the landline operators that this area meant an entire circle, which diluted the original recommendation. As was feared, WiLL later became roaming. If one can remember, the numbers of WiLL mobile changed as a customer moved from one circle to another, or one city to another, because legally, the same so-called fixed-line number could not work in two separate cities.
The arguments of the WiLL operators were simple: since the number changed, the service was limited. But roaming that they provided was due to the technology, and this could not be curtailed. In addition, the roaming in WiLL was distinctly different from what the cellular players provided, in which the number of the mobile remained the same. The debate was about consumers, who benefitted, and adoption of technology.
By 1995, after two rounds of bids, it was clear that everyone had miscalculated the market potential. Growth was slow, tariffs were high, and the cost of the mobile instrument was enormous. Faced with huge outgo because of their bids, and continuous losses, the Telcos approached the government for help. But the decision was regularly postponed because of political instability
HOWEVER, as of March 2002, WiLL had yet to become truly mobile, which happened later. In a case filed by the Cellular Operators Association of India (COAI), TDSAT, a tribunal to look into telecom disputes, ruled that it had no jurisdiction over the matter since it was a policy decision of the government. It didn’t get into the legalities and technicalities of the issue, and threw the WiLL ball out of the court, and out in the open. Despite thousands of pages of documents filed by COAI, the case was dismissed by a two-line order.
The cellular operators won a huge battle when the three-judge bench of the Supreme Court ruled in December 2002 that the tribunal erred in its conclusion that it could not interfere with government policies. The fact was that TDSAT “has the power to adjudicate any dispute”, and was the forum “for redressing the grievances of an aggrieved party” in the telecom sector. The regulatory body, TRAI, could rule in WiLL’s favour, but only if the guidelines were “consistent with the principle of level-playing field among the different categories of operators (WiLL and cellular)”.
Further, the apex court order maintained that the tribunal could contend that the introduction of WiLL “is in the interest of the consumer and a consumer would be able to get the services at a much cheaper rate, which will ultimately increase the tele-density in the country”. However, this had to be done after it had considered the evidence produced before it. “But non-consideration of relevant material on the issue regarding level playing field and absence of any finding of the Tribunal on that score would vitiate the ultimate decision”.
Just after the apex court judgment, Reliance Industries launched its WiLL services on December 28, 2002. At the launch event, Mukesh Ambani of Reliance spoke to Vajpayee, even as Pramod Mahajan, the then telecom minister, stood next to him. Finally, in August 2003, TDSAT, in a 2:1 order, ruled in WiLL’s favour. COAI became a divided house despite the minority judgment, which essentially said that WiLL was illegal. The association lost the will to fight, especially when WiLL had the political support.
Still, this may be an opportune time to take a re-look at the minority order of TDSAT, which was delivered by Justice DP Wadhwa, the Chairperson and the only judicial member. The other two members were a part of the earlier TDSAT bench that maintained that the tribunal could not get into government policies. Hence, their majority judgment, for COAI, was on the expected lines. It was Justice Wadhwa’s observations and conclusions that were more crucial, as they could be used in another legal proceeding in the apex court.
One of the points Justice Wadhwa made was that cellular and fixed service players “are two separate service providers”, and “separate tenders were invited” and “separate licences were executed” for both of them. Thus, “to allow mobile service for FSPs (Fixed Service Providers), howsoever limited, is in breach of the licence agreement of CMSPs (Cellular Mobile Service Providers).” He added that the interpretation cannot be given a different meaning “by referring to high-sounding words like “march of technology”, “fast-changing developments in telecom sector” or even to refer to document of ITU (International Telecommunication Union)”.
During the hearings, the government said that it could allow WiLL anytime as it “had (the) power to change policy and no formalities are required to be followed in order to bring about or give effect to policy changes.” Justice Wadhwa lambasted this with the logic that while the telecom policy of 1999, which allowed mobile, was placed before both the Houses of Parliament, the same wasn’t done with WiLL. “We do not know the system of Parliamentary procedure but we thought perhaps courtesy required to apprise the Parliament of the change of policy (for WiLL).” The judicial member of the tribunal hinted that the introduction of WiLL seemed to be a pre-planned and concerted effort on part of the various wings of the government. First, as was evident from media reports, DoT had internally decided in favor of WiLL in September 2000. “Record of the Department (DoT) shows it hurrying TRAI to send its recommendations as if it was to beat some deadline.” Here is how it happened.
ON October 31, 2000, the Chairman of TRAI wrote to DoT Secretary that the regulator “is conscious about the time frame within which this decision (on WiLL) needs to be taken and shall, therefore, endeavour to complete the process and submit its recommendations to the Government as early as possible. It is estimated that it should be possible to submit the relative recommendations in about 5-6 weeks from now.” In his order, Justice Wadhwa said that “we feel that the reason why Chairman, TRAI, was so apologetic about the time frame was obviously because of pressure by DoT.”
Once TRAI’s recommendations came on January 8, 2001, the DoT was already ready with its guidelines which, among other, included a few clauses that were part of TRAI’s report. It was “as if DoT knew the state of things to come. In this view of the matter, we cannot brush aside the argument of the petitioners that TRAI fell in line with what DoT required. DoT suppressed its earlier decisions which prohibited mobility in any form… and then again over-turned the same without any reason. How a well-considered decision could be ignored or over-turned, we are unable to comprehend.”
In a nutshell, Justice Wadhwa deemed WiLL as an illegal service that was not allowed as per the 1999 telecom policy, as well as the licence agreements that the DoT signed separately with the basic service operators. According to him, if the government did wish to introduce WiLL, it had to effect a change in policy in a transparent manner, and place the new policy before the Parliament. It could not be granted a back-door entry.
Mother of scandals
During UPA-1, Telecom Minister A Raja set the cat truly among the cellular pigeons, yet again fluttering wildly because of low ARPUs (average revenue per user), and losses. However, with 43 million mobile subscribers in 2004, the future looked rosy, and while the existing cellular operators wished to expand, there was a long queue of newcomers, who wanted to crash the party. Raja found a way to accommodate both these sections. It began when TRAI said that dual technology use should be allowed.
This implied that the ones with CDMA technology, the ones which led the WiLL battle, could offer GSM, which was the domain of the cellular firms. Within a few months, in October 2007, DoT accepted it. Immediately, within no time, the CDMA guys got the GSM licences. None of the GSM firms was interested in CDMA, which seemed to have lost its edge. Hence, the CDMA firms could jump the GSM queue, even as there was a queue of companies that were not in telecom, but wanted GSM licences.
Raja simultaneously devised a nefarious scheme to allow newcomers. On September 24, 2007, DoT issued a press release that it would accept fresh GSM applications only till October 2007. Suddenly, the number in the queue jumped from 167 to 575 within eight days. Raja decided that since spectrum could not be given to all, the ministry would entertain applications that were submitted till September 25, 2007. The queue was broken for the first time. He decided that spectrum would be at the 2001 prices.
Everyone is now aware of the Rs. 176,000 crore 2G scam, and how Raja superseded, skirted, and skidded the alternative and contradictory points raised by the various ministries such as law, finance, and Prime Minister’s Office. He deliberately and assiduously tinkered and changed the first-come, first-serve policy to allot the licences. The DoT said that the application that was received first would be processed first and get the LoIs. There was a catch—hich later took the shape of Catch 122.
THE first-come, first-served basis was derailed when the DoT said that once the applications were processed, whoever complied with the various conditions of the LoIs would be the first to get the actual licence. Of the 232 applications that were received till September 25, 2007, 122 were found to be eligible. At 2.45 pm, on January 10, 2008, DoT issued a press release and asked the eligible parties to collect their LoIs and fulfil the conditions. Seventy-eight managed to do it the same day; the others did it the next day.
It all blew up on the faces of the policy-makers, regulators, telecom players, and consumers when the Supreme Court cancelled the 122 licences doled out by Raja. It maintained that the policy to allot them was wrong, and that the Exchequer lost money because of the 2001 prices. Henceforth, the apex court said that spectrum will be auctioned, and licences given on that basis. This proved a huge windfall for the government, which earned huge sums when it sold the 4G spectrum, and prepares to do the same with 5G.
But as that scam seem to fade away, a new one, almost as big as the 2G one, became public. This was when the Supreme Court upheld the DoT’s claims on the dues of the mobile operators.
Alam Srinivas is a business journalist with almost four decades of experience and has written for the Times of India, bbc.com, India Today, Outlook, and San Jose Mercury News. He has written Storms in the Sea Wind, IPL and Inside Story, Women of Vision (Nine Business Leaders in Conversation with Alam Srinivas),Cricket Czars: Two Men Who Changed the Gentleman's Game, The Indian Consumer: One Billion Myths, One Billion Realities . He can be reached at editor@gfilesindia.com
