A blow struck for justice

The most perverse reaction to the Supreme Court order, cancelling all the 122 telecom licenses and 2G spectrum allocations made in January 2008 on a so-called first-come-first-served basis, is that it would dent investor confidence in India. Coming after the Apex Court's Vodafone judgement delivered last month — which was hailed for upholding the letter of the law and not giving any room for creative reading by the revenue authorities — this is a most bizarre and cynical interpretation. By now, it is common knowledge how the then Telecom Minister, Mr A. Raja, subverted all rules by granting licenses bundled with spectrum to new operators without any auctioning. Even the first-come-first-served principle was flexibly changed to favour particular companies by fixing October 1, 2007 as the last date for receiving applications and abruptly advancing it to September 25 without giving any reasons. The revised cut-out date itself was not made public till January 10, 2008 and, on the same day, those qualifying were also given precisely 45 minutes to furnish bank drafts for Rs 1,650 crore as upfront license fees. All this — including the insertion of the new first-pay-first-served rule — was obviously known only to those who were preordained to get the licenses.

By quashing the above licenses, the Supreme Court has come out against arbitrary rule-making and discretionary exercise of power. If anything, it should be welcomed just as the Vodafone verdict: Both are ringing endorsements of the rule of law, which is what investors, foreign or domestic, ought to expect in any country that is not a banana republic. True, there are those – including foreign investors – who forked out huge premiums to pick up stakes in the companies that originally procured the tainted licenses. Now that even these have been declared illegal, they would feel penalised for not having committed any sin themselves. But then, they should have known what they were buying into. Piggybacking on unscrupulous elements with ability to ‘manage' key politicians and officials was always fraught with risk. The latest judgment will hopefully make crony-capitalism all the more risky a strategy.

The cancellation of the licenses, moreover, offers a collateral benefit by way of releasing about 29 per cent of the country's total 2G spectrum, currently available with the new operators who account for hardly 9 per cent of the overall subscriber base. These surplus airwaves can now be offered for auctioning in a transparent manner, wherein everybody — including those whose licenses have been quashed — can participate. It is possible that the winners here could be incumbent operators or even new cash-rich entrants, triggering consolidation in the industry. That, by itself, may not be bad, given the sheer number of operators today. Unviable players may well be forced to exit, especially in a scenario where a sudden freeing up of spectrum renders it no longer a scarce commodity worth holding on to.

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