Bharti Airtel slapped Rs 350 crore fine and told to stop 3G services in 7 circles
The government has ordered Bharti Airtel, the country’s largest mobile phone company, to stop providing third-generation (3G) services in Kolkata, Maharashtra, Gujarat and four other regions by Monday, as it cracks the whip on companies offering these services in areas where they do not have permits.
Bharti moved the Delhi High Court on Friday against the telecom department (DoT) directive, and the court will hear the case on Monday.
DoT has also slapped a 350-crore penalty on the company for offering high-end data services in seven regions where it does not have 3G frequencies.
A government department official confirmed that similar bans, including penalties, would be slapped on Vodafone and Idea Cellular too, but declined to specify the time frame.
Bharti Airtel, Vodafone and Idea won 3G airwaves in 13, nine and 11 circles, respectively, in the 2010 auctions, and between them have a national footprint. They subsequently entered into intra-circle roaming pacts with each other and rode on the airwaves of their partners in circles where they did not hold spectrum themselves. This enabled them to offer high-speed data services on a pan-India basis.But the government has held these roaming pacts to be illegalGovt Knew of Deals, Say Telcos
Telecom MinisterKapil Sibal, in a recent interview to ET, rubbished the claims of the operators that DoT had given them an assurance before the 3G auctions that they could enter into similar pacts with each other. “For anyone to say they were orally assured, that in itself is suspect. If mature operators have bid for 3G spectrum on such assurances, then they should not be in business. If with open eyes, you are doing something that is not government approved, something that we have not permitted you to do, then you cannot seek relief,” he said.
The operators, on their part, insist they had entered into these roaming deals with the full knowledge and blessings of DoT, which they said had allowed such pacts before the auction of 3G airwaves. They accuse the government of reneging on promises with “retrograde”, “irrational” and “illegal” decisions.
Bharti Airtel shares closed 1.25% down at Rs 311.
If Bharti is not able to secure relief from the court on Monday, it will have to shut services in seven circles and its customers will have to migrate to other operators. The company had about 7 million 3G customers as of December 2012, but it is not known how many of them belong to the seven regions, which also include Haryana, Uttar Pradesh, Kerala and Madhya Pradesh, where it does not have own 3G airwaves.
The telecom head of a leading brokerage house, who declined to be named, said this would have minimal impact on Bharti’s balance sheet. “Even if the courts decline to issue a stay, the impact on Bharti’s balance sheet will be minimal as 3G revenues account for less than 2% of its total sales currently. The concern is on the long-term impact due to such steps from the government,” this executive added.
This is the third time in the last two years that the government has asked BhartiAirtel to stop providing 3G services such as video-conferencing, high-speed Internet and interactive gaming outside its licensed zones.
The telecom department first asked mobile phone companies to hang up on 3G roaming pacts in December 2011, resulting in operators moving the telecom tribunal (TDSAT). But in July last year, a two-member bench of the telecom disputes tribunal delivered a split verdict on mobile phone companies’ petition challenging the government’s order banning such agreements.
Following the split verdict, DoT referred the matter to the law ministry, which said the government could initiate action, including terminating mobile permits of companies that have entered into bilateral roaming agreements in areas where they did not have 3G permits.
The law ministry also said DoT was ‘well within its rights to claim the amounts earned by companies by providing 3G services for which they did not have any authorisation, permission or licence from DoT’.
Armed with the law ministry’s endorsement, the department had issued a second set of notices in August 2012. Mobile phone companies, including Bharti Airtel, had moved the Delhi High Court, and the latter had asked telcos to reply to the department’s notice and also directed the government to form a committee to look into the issue.
The telecom department committee, in its report, said 3G roaming pacts were “illegal and violated licence rules” and asked the government to direct telcos to terminate these pacts immediately, even as it proposed a 50-crore penalty per service area to be imposed for such violations.
DoT, in its latest notice, has said the pacts Bharti had entered into with other operators did not qualify as ‘roaming’, but were equivalent to spectrum sharing or leasing, which is currently not permitted.
It has also dismissed Bharti’s argument that it helped consumers, and said users had the option to move to another mobile phone company that offered 3G services by availing number portability.
“If the contention of the operators that they can sell full mobility services using the network of other operators by entering into so-called commercial roaming agreements is accepted, then it would be tantamount to the position where the companies having the licence to provide the mobile services will not establish any kind of network to provide the services and may not bid for spectrum during the auction process,” DoT said.