India in Shock as 122 Licenses Canceled

India's communications services market has been thrown into turmoil by the country's Supreme Court, which has ruled that 122 licenses issued by former telecom minister A Raja in January 2008 to mobile operators, many of them new to the sector, were issued illegally and must be canceled. (See 2G Verdict: SC Cancels 122 Licenses and Indian Gov't Grants Mobile Licenses.)

The operators affected, and the number of "circles" (services areas) in which they stand to lose their licenses are as follows (note that India is divided into 22 circles -- see A Brief Guide to India's Telecom Market ):

Uninor and Sistema Shyam (MTS India) are probably the two that are set to suffer the greatest losses as the affected licenses cover all the circles where they have launched services: Uninor currently has 36.3 million customers and MTS India has 15 million. (See Indian Court Cancels Uninor Licenses.)

By contrast, Videocon has 5.4 million users, Loop just 3.2 million and Etisalat DB just 1.67 million.

Idea will be affected but will still have plenty of scale and tens of millions of customers in other circles, while the ruling applies to only a small part of Tata Teleservices' national operations. S Tel has other licenses, but is still a relative minnow in the overall market with just 3.5 million customers (or 0.4 percent market share). (See Telco's Marketshare Report Card.)

In total, the move affects about 79 million of India's 893 million mobile connections. (See Slow Subscriber Growth Continues.)

The decision, which is the culmination of investigations into what is widely known as the "2G scam," is a major blow for the new entrants among India's 15 mobile service providers, which now have four months to determine their course of action. (See India Telecom 2010: In the Shadow of Scandal.)

The operators affected can challenge the court's ruling, which seems likely as some stand to lose billions of dollars spent on building networks and developing substantial subscriber bases. Among those who will feel the impact are overseas operators, such as Telenor Group (Nasdaq: TELN) and Etisalat , which hold major stakes in some of the affected service providers (Uninor and Etisalat DB respectively).

The country's leading mobile operators, though, are unaffected. And with mobile number portability (MNP) having been introduced in 2011, it seems likely Bharti Airtel Ltd. (Mumbai: BHARTIARTL), Reliance Communications Ltd. and Vodafone India , which together serve more than half of India's mobile users, will pick up customers not wanting to risk being cut off from their current provider in the coming months. (See Mobile Growth Grinds to Near Halt and MNP: Why The Uptake Is Slow.)

The move also frees up a great deal of valuable spectrum, which could now be auctioned by the government for billions of dollars. Now, though, the operators and the whole market are waiting for new guidelines and recommendations from the Telecom Regulatory Authority of India (TRAI) as they plan their next moves.

In other news from India:

— Ray Le Maistre, International Managing Editor, Light Reading

WilliamofOccam 12/5/2012 | 5:43:34 PM
re: India in Shock as 122 Licenses Canceled

Once the court had determined that the licenses were illegally obtained, I cannot imagine any other course of action if the rule of law is to be respected. I suppose this is a cautionary note to companies inversting in india that corruption does not pay in the long term.

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