The Supreme Court?s February 2012 judgment cancelling 122 2G telecom licences that were awarded in 2008 continues to impact the Indian telecom sector. Among the new players that lost their licences, S Tel and Etisalat have already shut shop and exited the market, and are unlikely to participate in the upcoming 2G spectrum auctions. Norway-based Telenor and Russia?s Sistema have invoked their bilateral treaties with the Indian government and threatened international arbitration to defend their investments in Uninor and Sistema Shyam TeleServices Limited respectively.
The latest to join the bandwagon is Loop Telecom. The company has approached the Telecom Disputes Settlement and Appellate Tribunal (TDSAT) to seek a refund of over Rs 47 billion from the government.
Loop Telecom?s Mauritius-based investors, Capital Global and Kaif Investment, have invoked the India-Mauritius bilateral investment treaty and have threatened international arbitration if the government does not resolve the issue within six months.
In its plea filed with TDSAT, Loop Telecom has sought a refund of the licence fee of Rs 14.54 billion for 21 mobile permits issued in 2008, and an interest of
Rs 7.37 billion at the State Bank of India?s prime lending rates till April 30, 2012. Further, the operator has demanded the discharge of its performance bank guarantees worth Rs 6.96 billion, and asked the government to return liquidated damages of Rs 78 million with interest.
In its petition to TDSAT, Loop Telecom has mentioned that ?the reason for quashing the first come, first served policy, the UASLs and the subsequent allocation of spectrum is wholly and absolutely attributable to the acts and omissions of the respondents (in this case, the Department of Telecommunications [DoT] and the Telecom Regulatory Authority of India [TRAI]), and as a direct proximate result thereof, the petitioner (Loop) has suffered huge losses and damages?.
Loop Telecom, which is operational in the Mumbai circle, has asserted that the faulty issuance of licences and policy loopholes have affected the company greatly. It has sought a compensation of Rs 10 billion, with interest, from the government for the ?loss of reputation?.
The company has also asked TDSAT to direct the government to pay around Rs 8 billion for investments made in infrastructure and corporate expenses while renewing bank guarantees and interest on loans taken to meet its roll-out obligations. Besides the monetary compensation, Loop has demanded that the tribunal should prevent DoT from taking coercive action such as encashment of the bank guarantees deposited by the operator.
The company has stated that it is its basic right ?as a corporate of India? to approach the tribunal and, by taking such a step, it is ?not asking for something extraordinary but only demanding what is rightfully due to it since its mobile permits had been deemed illegal by the Supreme Court and thereby quashed?.
In February 2012, Loop Telecom had written to the prime minister saying that it would surrender its permit if the government agrees to refund the licence fee of Rs 14.54 billion along with the interest. This was followed by an announcement by the company in April 2012 regarding the termination of its business in the country, except the Mumbai circle, where its sister concern Loop Mobile offers services.
Accepting the operator?s petition, TDSAT has issued notices to DoT and TRAI. A TDSAT bench, headed by its chairman Justice S.B. Sinha, has given four weeks? time to the government bodies to file their reply. The tribunal has set July 17, 2012 as the date for the next hearing.
This is undoubtedly a considered move by Loop Telecom to recover some of its investments. If its appeal to TDSAT is successful, it could step up the pressure on DoT and TRAI and expose them to arbitration by other operators facing financial losses on account of losing their 2G licences.
