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2G verdict: Supreme Court cancels all 122 licenses

TRAI chief JS Sarma has said that the regulator will recommend that the licenses be allotted now through an auction, not on the "first-come-first-served" policy that the government followed.

Telenor CEO Jon Fredrik Baksaas

In a landmark judgement, the Supreme Court has cancelled 122 licenses for mobile networks issued during A Raja's tenure as Telecom Minister, and asked telecom regulator TRAI to make fresh recommendations on allotment of the licenses within four months.


TRAI chief JS Sarma has said that the regulator will recommend that the licenses be allotted now through an auction, not on the "first-come-first-served" policy that the government followed. Telecom Minister Kapil Sibal says auction it shall be and that the government will await the TRAI's guidance on next steps.Mr Sibal said the government welcomed the court's judgement as it would bring "clarity, sanity and hope to the telecom sector." The verdict endorsed his government's stand that auction of spectrum was the best the route, the minister said. 



The Supreme Court said today that the licenses had been allotted in "an unconstitutional and arbitrary manner." Telecom Minister Kapil Sibal says this is not an indictment of his government but that of the policy of allotting licenses on a first-come-first served basis, handed down "in legacy by the BJP-led NDA government" that ruled before the UPA.



He suggested the BJP apologise; that apology is unlikely to come. The main opposition party has seized upon the political opportunity that today's verdict presents saying the UPA government faces a crisis of credibility and that the Manmohan Singh government must accept collective responsibility for a "public asset being sold for a song." It wants the PM to accept responsibility for the 2G swindle and said it wants answers from both the PM and UPA chairperson Sonia Gandhi on what it calls "the damaging policies of the UPA leading to the creation of a global no-confidence." 

"The government has become completely shameless. Entire policy of the government and implementation is held to be illegal. Huge ramification, shameless to say after this that government vindicated, not indicted," senior BJP leader Arun Jaitley told NDTV.



So it also fell on Mr Sibal, who was making the government's first and only reaction so far, to defend Prime Minister Manmohan Singh and Home Minister P Chidambaram saying they "were in no way responsible". In a second crucial verdict, the Supreme Court today refused to order a CBI investigation into Mr Chidambaram's role in the telecom scam, asking a CBI trial court to decide on this instead within two weeks. The trial court is also expected to give verdict on Saturday on a petition that seeks to make Mr Chidambaram a co-accused in the scam. Mr Chidambaram was the finance minister in 2008 when the 2G licenses were alloted by Mr Raja and has been accused of being aware Mr Raja's elaborate ruse, and sanctioning the decisions that led to the swindle. 

Mr Raja, who is in jail, allegedly ignored advice to hold an auction for licenses and spectrum. Instead, he followed the first-come-first-serve policy, but is accused of twisting guidelines so that companies who he allegedly colluded with jumped to the head of the queue and won licenses out of turn for a pittance. All those 122 licenses have been cancelled today.



Before he made his public defence, Mr Sibal met the Prime Minister and soon after, a Group of Ministers on media met this afternoon. Mr Chidambaram heads that group, but he skipped the meeting. As he talked policy, Mr Sibal had to walk the political tightrope too. The UPA government's distancing itself from the 2G license allotment has meant an isolation of Mr Raja, who belongs to the DMK, a partner in the UPA at the Centre. Mr Sibal was at pains to say that he was "not attacking Raja" and that the DMK was "still a valued ally."



Today's Supreme Court order will impact business, politics and the consumer. The telecom sector will see major upheaval with 10 newer players affected. The Supreme Court, while cancelling all the 2G licenses issued by Mr Raja in 2008, also fined six telecom firms. Three of them, Etisalat, Uninor and TATA, have been penalized Rs. five crore each. Loop and Essar have been fined Rs. 50 lakhs each. Uninor has protested saying it has been "unfairly treated" and is "being penalized for faults the court has found in the government process." 

While Mr Sibal hastened to assure consumers that they would not be hit, the first question that was asked as the big order came was: will the user pay more in telephony tariffs? Analysts say if the government decides to auction, telecoms may pay much more than they have in the past, and prices could go up for all consumers.



The markets reacted swiftly to the court's verdict. Stocks of telecom companies whose licenses have been scrapped fell. Stocks of players unaffected by the verdict, like Bharti Airtel and Idea soared. These companies, along with Vodafone, which is not listed in India, stand to make big gains.



In a third important judgement this morning, the court refused to sanction a Special Investigation Team to over-see the CBI's inquiry on the telecom scam. It said the Central Vigilance Commission (CVC) would monitor the investigation instead - the court asked the CBI to submit its status reports to the CVC in sealed envelopes. The court did add that it is "not casting any asperations on CBI by asking them to report to CVC."



The verdicts today are based on three petitions by Janata Party President Subramanian Swamy and lawyer-activist Prashant Bhushan.