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Cell Phone Carriers in India Could Plummet after Supreme Court Throws Out Licenses

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February 02, 2012

Cell Phone Carriers in India Could Plummet after Supreme Court Throws Out Licenses

By Ed Silverstein, TMCnet Contributor

In a ruling that could have far-reaching consequences for consumers, carriers and the scandal-plagued government of India – the nation’s Supreme Court has ordered that 122 licenses made to mobile phone companies be revoked.

The Los Angles Times reports the ruling could lead to tens of millions of India's cell phone users ending up “with a busy signal.” In fact, analysts told the LA Times that several companies may no longer provide cell phone services, and perhaps as many as 50 million consumers may have to change their carriers. There could be four or five carriers in the future, down from the dozen or so now operating in the country, according to the Times.

The ruling comes as a result of a 2008 scandal during which 2G spectrum allegedly was distributed at older prices, causing the government to lose over $39 billion.

"It is the single biggest act of corruption in India," opposition leader Arun Jaitley said in a statement. "It's a monumental fraud."

In the ruling, the judges said officials gave an "important national asset at throw away prices,” according to a report from The Times of India. It was alleged the government sold mobile phone frequencies via a process that favored some companies, TMCnet adds.

Ex-telecommunications minister Andimuthu Raja is now in jail on corruption charges – and more powerful leaders are under suspicion, the LA Times said. Prime Minister Manmohan Singh could even be a target in the continuing inquiry.

Some of the carriers who will lose out are joint ventures are Abu Dhabi's Etisalat, Russia's Sistema (News - Alert), and Telenor, Reuters said. The carriers may appeal the case in court.

On the other hand, Reuters reports that Bharti Airtel (News - Alert) and Vodafone may benefit from the Supreme Court’s decision. However, it will be the big players that stand to benefit the most from the ruling. "This verdict is good news for established incumbent operators and in the short term, we are likely to see some increase in tariffs," Benoy C.S., a director at consulting firm Frost & Sullivan, told Reuters (News - Alert).

Over the next four months, India’s regulators have to come up with new regulations and the spectrum will be sold during an auction.

So far, India’s police have charged six companies and 19 defendants in the case which include: a billionaire owner of the Essar Group, executives at Telenor and Etisalats ventures in India and executives from Anil Ambani's (News - Alert) Reliance Group.

To get an idea of how popular cell phones are in India, the nation has 1.2 billion people and 893 million mobile phone users. Currently, it is the second largest cell phone market worldwide.

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Ed Silverstein is a TMCnet contributor. To read more of his articles, please visit his columnist page.

Edited by Jamie Epstein

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