Uninor moves SC on Trai's auction proposals

Uninor, a joint venture controlled by Norwegian telecom giant Telenor, on Tuesday filed an interim application in the Supreme Court, stating telecom regulator Trai's recommendations on spectrum auctions were not in line with the court's order.

The move came a day after Telenor threatened to pull out of India if the regulator's recommendations were accepted by the government. Telenor invested Rs 14,000 crore (Rs 140 billion) to launch telecom services in 13 circles.

The company announced it had written off its fixed and intangible assets in India worth 3.9 billion Norwegian krone (Rs 3,583 crore). Telenor has written off investments in its Indian mobile arm to the tune of 8.1 billion krone (Rs 7,403 crore) in two tranches.

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In a statement, Uninor said, "We have informed the Department of Telecommunications (DoT) that in our view, the Trai auction recommendations are not in line with the order of the Supreme Court. On Tuesday, we sought the Supreme Court's permission to file an interim application to bring this to the court's attention."

The company added the court had allowed it to file an application and stated it was open to hearing arguments.

On February 2, the Supreme Court cancelled 122 2G licences, including of Uninor in India. It also directed the regulator to come out with recommendations for the auction of spectrum that would be available after cancellation within two months.

In its order, the court stated that "within two months, Trai shall make fresh recommendations for the grant of licences and allocation of spectrum in the 2G band in 22 service areas by auction, as was done for the allocation of spectrum in the 3G band.

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The government shall consider the recommendations of Trai and take an appropriate decision within the next one month and fresh licences be granted by auction".

However, on April 23, Trai stunned telecom operators by proposing a stiff reserve price for the auction of spectrum at about Rs 3,622 crore per MHz in the 1,800-MHz band.

The reserve price was nearly 10 times higher than what operators had paid in 2008 for acquiring licences at Rs 1,658 crore, which came bundled with 4.4 MHz of 2G spectrum. The recommended price is also eight per cent higher than what was paid by operators in the 3G auction (base price of Rs 3,500 crore for five MHz) in 2010.

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The move united both new as well as incumbent operators such as Bharti, Vodafone, Uninor, Idea and Videocon, which wrote to Communications Minister Kapil Sibal, saying if Trai's proposals were accepted, mobile rates would rise 25-30 per cent.

Telenor Group Executive Vice-President Sigve Brekke then said the company might be forced to exit the country.

"If these recommendations become policy, then the government of India will be forcing Telenor Group to exit. It will be almost impossible for us to participate in the upcoming auctions," Brekke said.

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Analysts say the Uninor move could encourage others to go to court as well.

KPMG Partner Jaideep Ghosh says, "The impacted companies will take every possible step to safeguard their investments. Secondly, in case of Telenor, they will have pressure from their international shareholders as well, which means all available legal options will be taken by the company."

He said it might set a precedent for other new players, as any court directive would be applicable to all the players. However, some lawyers representing GSM operators say they have advised their clients not to challenge the recommendations in the Supreme Court.

The court had ordered the government to conduct the spectrum auction by August 31.