India Court Ruling Clears Way For Phone Companies Expansion
Tuesday December 17, 7:16 am ET
NEW DELHI -(Dow Jones)- India's fixed-line phone companies will be able to proceed with
expansion plans for wireless services following a Supreme Court ruling Tuesday that has
removed a major stumbling block preventing these companies from widening their reach.
The court's ruling also requested the government to reconsider claims by mobile phone
companies that they aren't operating on a level playing field in the cellular market.
Lawyers said the court rejected a petition brought by the Cellular Operators Association
of India, or COAI, seeking to prevent fixed-line phone companies from offering wireless
services.
"The court explicitly rejected the repeated requests of cellular operators to stop the roll
out of wireless services," said Ramji Srinivasan, a lawyer for fixed-line operators.
Analysts said fixed-line companies, such as Reliance Infocomm Ltd., a unit of Reliance
Industries Ltd. , and Tata Teleservices Ltd., which is part of the Tata Group , will now
be able to proceed with their plans to either establish a wireless network or expand what
has so far only been a toehold in that market.
Reliance Infocomm plans to launch a wireless network on Dec. 28 in eighteen states,
while Tata Teleservices plans its launch in New Delhi on Dec. 19 to expand its fledgling
wireless service.
While both Reliance Infocomm and Tata Teleservices are unlisted, the shares of Hughes
Tele.com Ltd.(P.HUT), a fixed-line operator, fell 2.3% to 6.3 rupees ($1= INR48.16),
minutes after the court's ruling.
The market was concerned that Hughes, along with others seeking to expand into the
wireless market, will face heavy costs in operating a wireless service, including hefty
license fees to the government.
In the same ruling, the court referred a petition by the COAI challenging the
government's decision to allow fixed-line companies to offer wireless services back to an
industry tribunal.
Increasing Phone Density In India
The court ruled that the tribunal hadn't considered all the issues of the case. Manjul
Bajpai, a lawyer for COAI, said the tribunal will reexamine his client's concerns that they
are not operating on level-playing field. Cellular phone companies claim that fixed-line
operators were granted free licenses by the government to offer wireless services, a
move aimed at increasing the density of phone services.
"The demand is that fixed-line phone companies must get a cellular license if they want
to offer service in that market," says Bajpai, adding that the major cellular companies
paid INR90 billion to the government in license fees, while fixed-line operators still aren't
required to do this to set up a wireless network.
This means that cellular operators, such as Bharti Tele-Ventures Ltd. and Hutchison
Telecom Ltd., a unit of Hong Kong-based Hutchison Whampoa Ltd. , have paid the
government billions of rupees in license fees that their fixed-line competitors - under
current rules - won't face when they either enter or expand into the wireless market.
India has some 20 so-called cellular regions that require separate operating licenses for
entrants.
Industry watchers say the verdict will benefit cellular operators in the long- term since
their calls for a level-playing field have been recognized for the first time since this
dispute arose two years ago.
Bharti's share price rose 2% to INR23.35 shortly after the ruling. Bharti is India's only
listed cellular phone company.
"The court feels there was an error in judgment by TDSAT (Telecom Dispute and
Settlement Appellate Tribunal)," said Bajpai, the attorney for the cellular phone
operators. "Now the telecom tribunal will have to reconsider the cellular operators'
claims."
"We're happy with the judgment," said Akhil Gupta, joint managing director of Bharti.
Following the ruling, the focus will now be on TDSAT's judgment, which one of the
lawyers acting for the cellular operators expects will probably be delivered in three to six
months.
Khandwala Securities Ltd. analyst Anant Katare believes that following the court's
recognition that cellular companies have a valid case the TDSAT is likely to recommend
to the government that legislation be amended to make fixed- line phone companies pay
a license fee if they offer wireless services.
India has around 500,000 wireless phone users, according to the Association of Basic
Telephone Operators. There are more than 9.7 million cellular phone subscribers across
India.
-By Sonal Singh; Dow Jones Newswires; +91-11-2461-9417; Sonal.Singh@
Dowjones.com
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