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SC verdict on 2G: What it means

After the Supreme Court canceled 122 licenses issued by Andimuthu Raja, the government will have to determine a market price for the spectrum. But with fewer players around, the tariff increase could be substantial.

Kushan Mitra | February 3, 2012 | Updated 12:47 IST

Since the morning, we have been inundated with a lot of views and reactions to today's Supreme Court judgement by Justice Asok Kumar Ganguly. The learned Justice on his last day on the Supreme Court bench delivered what can only be described as a stunning judgement when he quashed all 122 licenses which had been allocated by Andimuthu Raja, the former Minister of Communications and Information Technology, currently a resident of Tihar Jail.

Kushan Mitra
Kushan Mitra
The judgement also, in paragraph 70, indicts the former minister while Justice Ganguly says that this judgement should not be considered by the CBI Trial Court trying Raja (a judgement is due on Saturday), it bodes ill for him and his confidants and some of the beneficiaries of his spectrum largesse. The case is an amazing victory for the persistence of the petitioners and some parts of the media.

But beyond all the analysis, what does this judgement mean? We try and make some sense of it.

  • The government will now have to determine a market-price for the spectrum - 540 megahertz of spectrum across all of India's 22 telecom circles, almost all of it in the 1800 megahertz band for GSM (but some parts in the 850 megahertz band for CDMA)
  • In the four months that court has said that operators will have to 'resolve' their issues with the government expect some of them to settle their issues with the government paying market prices. It is likely that both Uninor, part owned by the Norwegian state-owned company Telenor and Shyam-Sistema, part owned by the state of Russia, will likely pay the differential rate determined by auctions.
  • However, their Indian joint-venture partners might lose out badly. Some other operators might voluntarily 'surrender' their licenses.
  • That said, a lot of the excitement that surrounded the telecom sector in 2007 and 2008, indeed all the way to the 3G spectrum auctions in 2010, has evaporated following the less than stellar results of several of the newer operators. However, the government will raise a lot more money than they did in 2008.
  • The increased costs for operators and the lack of foreign interest, thanks to rapidly declining user revenues, will mean that prices for telecom usage, already in the basement in India will start climbing and while India might still have among the lowest per-minute costs, the percentage increase could be substantial. The era of the 1 paisa a minute voice call is dead. How much more will you pay for your calls? We don't know, but we are certain that you will pay more.

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