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Corporate Sep 28, 2012

DoT to suspend 3G roaming pacts, seeks clarification

By Sindhu Bhattacharya

The Department of Telecom is expected to issue show cause notices to four telcos, asking them to explain why action should not be taken against them for offering 3G services in circles where they did not bag 3G spectrum.

Officials at various telcos said the notices could be received by fax around the close of business hours today.

This morning, Telecom Secretary R Chandrashekhar confirmed that show cause notices will be issued today. DoT will seek immediate suspension of 3G service by telcos in areas where they do not directly hold 3G spectrum and where they have been offering 3G services by entering into roaming pacts with other operators. It is also expected to provide them a 60-day window to explain why penalties should not be imposed on them for violating their license agreements.

It is also expected to provide them a 60-day window to explain why penalties should not be imposed on them for violating their license agreements.

But telcos may be in for a rude shock. According to documents reviewed by Firstpost earlier, DoT is not only planning to impose a maximum fine of Rs 50 crore per circle, citing licence violations, but has now decided to seek fresh legal opinion on what it calls 'unjust enrichment'. Put simply, this means that apart from charging for licence violation, DoT also wants to recover the revenues that telcos have gained by offering intra-circle roaming on 3G services. So, not one but two show cause notices may be on their way.

Bharti, Vodafone, Idea and Aircel had won 3G airwaves in 13, 9, 11 and 13 circles, respectively and their roaming pacts ensured that customers could access high-speed data services on a pan-India basis. There is no clarity yet on whether Tata Teleservices would also be issued a notice by DoT. A Tata Tele spokesperson said that his company had never used roaming pacts to offer 3G services. He also said that though Aircel had done some beta testing on the Tata DoCoMo network for about a month, this was stopped immediately when the first show cause notice was received from DoT more than a year ago.

Sources told Firstpost that a draft show cause notice was already ready with DoT for Bharti's operations in Haryana, Maharashtra, UP (East), Kolkata, Gujarat, Kerala and Madhya Pradesh service areas. Earlier media reports suggested that Bharti is a 'taker' of 3G spectrum, or uses high-end frequencies of other operators, in the nine regions where it does not have 3G spectrum bandwidth. However, Bharti also shares, or is a 'giver' of 3G, to Vodafone and Idea in 10 circles, these reports suggested.

Similarly, Vodafone, Idea and Aircel use each other's networks in circles where they themselves are not present to offer 3G services. Earlier this year, the Telecom Dispute Settlement Appellate Tribunal (TDSAT) gave a split verdict on a petition filed by telcos, challenging an order by the Department of Telecom to stop such roaming pacts.

While TDSAT Chairman SB Sinha allowed petitions by Bharti Airtel, Vodafone, Idea Cellular, Aircel and Tata Teleservices challenging the DoT order, he also made it clear that DoT needs to study licence conditions of each operator before deciding if there has been any violation when these telcos entered into pacts with each other to offer 3G services in circles where they did not have the license to offer such services.

But TDSAT member PK Rastogi said since each petitioner (telco) does not have 3G licence in some circles, they cannot provide 3G services in these circles by making an intra-circle arrangement.

In his order, Judge Sinha made it clear that in its recommendations on the subject, sector regulator Trai "did not positively say that the ICR agreements entered into by the petitioners were violative of the terms and conditions of the licence.

It has assigned several reasons suggesting that the licensees should not be allowed to continue to do so as, by reason thereof inter-alia the Central Government, would lose a lot of revenue. But then, as noticed heretobefore, its views were prima-facie in nature. The same were to be accepted by the DoT."

He said DoT should consider the terms and conditions of each ICR agreement separately "so that the terms and conditions contained therein may be analysed and the decisions therefore are rendered thereafter."

The government had raised over $12 billion from 3G auctions in 2010. But no company managed to win airwaves in all of the country's 22 service zones as the bid prices were much higher than expected - this is what led to ICR pacts.

by Sindhu Bhattacharya

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