Telenor cleared to challenge auction plans

A man speaks on a mobile phone in front of a closed shop displaying an advertisement for Uninor on its shutters in Mumbai February 6, 2012.

NEW DELHI (Reuters) - Telenor's Indian unit said on Tuesday the Supreme Court of India has allowed it to file an application challenging the telecom sector regulator's proposals for a 2G airwaves auction, which have been widely criticised by mobile carriers.

The court has asked the Indian government to redistribute airwaves through an open auction by August, after ordering cancellation of all permits that were awarded to carriers in a scandal-tainted allocation process in 2008.

Telenor is among eight carriers that are set to lose some or all of their zonal operating permits after the court order, and the auction would be their last chance to win back those licences.

But in another blow to the affected carriers, the sector regulator has suggested an auction starting price that is nearly 10 times higher than what companies had paid in the 2008 sale.

The regulator has also proposed that less than a fifth of the airwaves available be put up for auction, which risks driving up bid prices, and also means that only one or two of the carriers whose licences are being cancelled can win back the permits.

Telenor's India unit said in a statement on Tuesday that it had sought clearance to argue that the auction proposals were not in line with the court's earlier order.

"The court has allowed us to file an application and stated that it is open to hearing our arguments," the company said, without elaborating. A company spokesman declined to comment beyond the statement.

The regulator's proposals are not binding on the Indian government and a panel of ministers have the final say on auction rules.

Telenor, which has written down a total $1.4 billion of Indian assets, warned on Monday it would exit the Indian market if the current plans for the auction go ahead.

(Reporting by Devidutta Tripathy; Editing by Hans-Juergen Peters)