SC rejects appeals in telecom licence dispute

NEW DELHI Thu Apr 5, 2012 6:23am IST

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NEW DELHI (Reuters) - The Supreme Court on Wednesday rejected appeals to overturn an order cancelling telecom licences awarded in 2008, dealing a blow to the companies affected.

The court in February had ordered cancellation of 122 telecoms licences held by eight operators because of alleged irregularities in the way they were awarded in 2008. A state auditor estimated New Delhi may have lost as much as $34 billion as the permits were given out at "unbelievably low" prices.

The scandal is one of several that have erupted during Prime Minister Manmohan Singh's second term in office, and has rocked the government and businesses.

Mobile operators including Telenor and Sistema's Indian joint ventures and Indian companies Idea Cellular and Tata Teleservices had filed separate pleas seeking a review of the court's decision.

These companies are set to lose some or all of their licences.

"We have carefully perused the review petitions and the record of the case and are satisfied that the ... judgment does not suffer from any legal infirmity warranting reconsideration of the issues decided," a two-judge panel said in its order dismissing the petitions.

Only about 7 percent of India's more than 900 million telecom users will be affected by the licence cancellation as there are more than a dozen players in India's fiercely competitive market.

Norway's Telenor, whose Indian joint venture will lose all its 22 permits, said it was "disappointed" by the dismissal of its review plea.

"We will now move a curative petition," it said in a statement.

Indian laws allow a "curative" petition or further appeal even after a review plea is dismissed. This is heard by three top Supreme Court judges.

The Indian unit of Russia's Sistema, which too will lose all but one of its permits, said it was considering future legal actions.

Telenor and Sistema have separately asked the Indian government to resolve the licence disputes, citing bilateral pacts. Telenor has said it would seek compensation from New Delhi if the dispute is not resolved, while Sistema has said it reserved its rights to go for international arbitration.

AUCTION DILEMMA

The Supreme Court in its February order asked the government to revoke the permits in early June and redistribute them through an open auction. The auction would be last chance for the affected carriers to win back the permits, but there is no clarity yet on the timing of the auction.

The telecoms ministry said it needs more than a year to complete the auction process, creating uncertainty for the companies who have to shut down operations in June.

The telecoms ministry has filed a separate plea with the Supreme Court, seeking the court's direction on the timing of the auction. The plea is yet to be heard by court.

Among other foreign telecoms groups affected by the licence cancellation, Abu Dhabi's Etisalat had said it would shut down its Indian operation on March 31.

Bahrain's Batelco, whose Indian joint venture is set to lose all its six licences, has agreed to sell its 43 percent stake in Indian affiliate S Tel to its local partner for $175 million.

Indian police have charged a total 19 people and six companies in the alleged scam, including a former telecoms minister Andimuthu Raja, who presided over the 2008 licensing process, and several high-ranking corporate executives. All accused in the case have denied any wrongdoing and their trial is ongoing.

The Supreme Court also dismissed on Wednesday a plea by Raja seeking a review of the February order.

The judges, however, agreed to hear a plea by the Indian government on April 13 to review some observations the court had made in its February order. The government has not challenged the licence cancellation.

(Editing by Krittivas Mukherjee and Jane Merriman)

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