122 2G Licenses cancelled: Industry Reaction

The Supreme Court Judgement on cancellation of 122 2G licenses today morning has already created ripples in the Industry. While major telecom players are at ease; affected players like Uninor, Stel and loop Mobile are sulking in pain.

''We have been unfairly treated as we simply followed the Government process we were asked to,'' Uninor said in a statement.

The licenses cancelled include 21 of Videocon, 22 of Uninor, nine of Idea, 21 of Loop, six of S-Tel, 21 of Sistema, three of Tata, 13 of Swan and two of Allianz.

SSTL whose 21 licenses are cancelled with this verdict is in utter shock and grief. ''We are still awaiting the full text of the judgment, hence it would be a little premature to offer any detailed comments,'' stated SSTL spokesperson.

Uninor has also appealed to the government for a solution so that its customers are not affected by the verdict. ''We also expect the authorities to ensure that our 36 million customers, 17,500 workforce and 22,000 partners are not unjustly affected,'' said Uninor.

Idea in its statement said, ''It is unfortunate that a serious incumbent operator like Idea Cellular is being made to suffer due to this cancellation of licenses, despite being fully compliant at each stage of the license allocation process. As per information available from the media, we understand that the license holders are allowed to continue operations for the next 4 months and an auction will be conducted for these licenses within this period. We will study in detail the above Supreme Court judgement and explore all possibilities to protect our investment.''

Big players like Aircel and Rcom are shrugging their shoulders off for any involvement with the entire issue by giving out their statements.

RCOM's licenses were all issued in 2001 and prior. RCOM's licenses are not affected by the Supreme Court judgment pronounced today,''RCom stated whereas Aircel statement says,' Aircel & DWL licenses do not fall under the list of 2G licenses granted under and there upon by the DOT circular dated, January 10, 2008 which has been quashed by the Supreme Court today.'

The licenses would be canceled from four months from now. The Supreme Court has now asked the telecom regulator TRAI to make fresh recommendations for how 2G licenses should be allotted within four months.

''As, TRAI has recommended earlier and always, we will go for an auction route to issue the fresh licenses,'' TRAI Chairman J S Sarma told Voice&Data.

The TRAI chairman also said that the authority would start the work immediately and might release a consultation paper on this. ''We would study the entire verdict in details. If required we might release a consultation paper on how to go about this,'' Sarma added.

Industry experts feel that auctions may not be a fruitful decision in long run.

''Cancellation of the 2G license could cost India Inc over 8 to 10 bn US annually, which is currently in circulation by 122 such licenses. Auction may not see much excitement and a lot of clarity on whether existing operators can participate or not etc,'' explains Prashant Singhal, Partner in member firm of Ernst & Young Global.

''We now need to look at how the rights of operators, affected subscribers, investors and lenders, employees and the ecosystem will be safeguarded by the government following today’s decisions,''Mohammad Chowdhury, Executive Director & Leader Telecom, PwC India.

“Loss of investor confidence imminent due to policy confusion raised by SC judgement. Clarity in formulation of new guidelines, statesmanship in vision, character in execution essential to regain trust,”says CyberMedia Research Lead Telecoms Analyst Naveen Mishra.

It is also believed that this judgement will have ripple influence on the entire telecom value chain and derivatives of the sector including passive infrastructure providers, value added service providers, OEMs etc.

''It will generate negative market sentiment waning the investors’ confidence which will have a significant impact on the FDI inflow across sectors. The sector will witness substantial erosion in foreign investments by the leading international operators. Also, impact would be on 9-10% in terms of total subscriber market share,'' said Singhal, Ernst & Young Global.

This judgement has also created tremors to the existing customers of the involved operators for their services after four months. A serious concern is felt for the customers facing issues with their existing telecom network to fall out after four months. A huge possibility for existing subscribers of Uninor and other players involved to apply for MNP(Mobile Number portability) and opt for unaffected telecom giants. This can be a huge blow for involved player's market share and subscriber numbers.

''We are analyzing the verdict and this is too early to comment. Volatility in business environment can impede stability and progress,'' said Fredrik Jejdling, Head of Region, Ericsson India.