PM meets senior ministers to discuss 2G verdict fallout

New Delhi: Prime Minister Manmohan Singh today held consultations with senior ministers like Salman Khurshid, Pranab Mukherjee, Kapil Sibal and P Chidambaram to discuss the impact of the Supreme Court order cancelling 122 licences for mobile networks issued in 2008 and to review the rules that will apply for an auction of 2G spectrum. The "preliminary meeting", however, ended without any decision being taken.

"The ramifications and the implications of the judgement were based before the group. The purpose of this exercise was only to inform the Prime Minister and the group about the salient features of the judgement and its consequences and implications and the basis on which the judgement has been rendered. It was an exercise for informing the group. We were not required, nor did we seek any decisions from the Prime Minister or the group. That was not the intent of the exercise," Mr Sibal said after the meeting that lasted a little over an hour.

While cancelling 122 licences earlier this month, the Supreme Court had also ordered that the licences it had revoked be reassigned in four months, based on an auction process. That verdict caused spasms in corporate India, with several foreign investors registering their complaint.

The government, crucially, also has to decide whether to cancel 2G licences issued before 2008 as well because in those cases too, spectrum was granted for free to giants like Tata and Bharti-Airtel. The idea is to explore whether to create a level-playing field now for all operators who would like to bid for licences. In its order, the Supreme Court had said that it had not struck down the licences issued before 2008 because they were not mentioned in the petition that it considered.

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Sources say the government has prepared a draft cabinet note that talks about auctioning additional spectrum at market price once it is vacated by the companies whose licences have been cancelled. As per the court order, these companies have to vacate spectrum allocated to them by June 2. However, the government has to factor in the fact that some of these companies may ask for a review of the Supreme court order. The government also has to decide whether the auction would be open to only companies that have been affected by the court order or also to existing players whose licences have not been affected. 

The 2G licences that were declared null and void by the Supreme Court were allocated by A Raja when he was Telecom Minister in 2008, a term apparently suffused with corruption and an intransigent subversion of rules. Mr Raja followed a first-come-first-serve policy on paper; in practice, he allegedly manipulated the line of applicants to help a few chosen companies pole-vault to the head of the queue. Mr Raja has just completed a year in jail.

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When cancelling the licences, the Supreme Court said, "There is a fundamental flaw in the principle of first-come-first-served in as much 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 principle has inherently dangerous implications."

Companies like Norway-based Telenor, which partnered with real estate giant Unitech to set up Uninor Wireless, say that the cancellation of licences punishes them irrationally. Telenor bought 67% stake in Unitech Wireless a few months after the latter bought its 2G licence for Rs. 1600 crores. Unitech is one of the companies charged with criminal conspiracy and cheating along with Mr Raja. Some of India's biggest companies like Reliance Telecom are also on trial.

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Uninor's case has been taken up at a diplomatic level by Norway. The country's IT minister on Tuesday met Kapil Sibal.

As a consequence of the Supreme Court verdict last week, Bahrain-based Batelco announced its exit from India, selling its stake in mobile firm STel.

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Russia's Communications Minister Igor Shchyogolev is reportedly going to visit India to express the country's concern over its investments in the Indian firm, Sistema Shyam Teleservices (SSTL).

SSTL, a joint venture between Russia's Sistema and India's Shyam Group, which provides its services under the MTS brand name, has also said that it reserves the right to protect its interests by using all available judicial remedies and was mulling the option of filing a review petition in the Supreme Court. 

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Sistema holds a 56.68% stake in the venture, while the Russian government holds 17.14% and the Shyam Group of India has another 23.98%. The remaining 2.2% is publicly owned.