The Supreme Court yesterday accepted telecom service provider's S Tel's apology for having written to the Department of Telecommunications (DoT) on issues pending before the judges.

While rapping the company for its action the court had also demanded an explanation.

However the court also upheld S Tel's case on the manner in which it had been earlier denied a telecom licence for various areas (circles), in what is seen to be a blow to the government. The company's case on the matter had been earlier upheld by a bench of the High Court of Delhi and subsequently by a larger bench of the same court when government went in appeal. Finally the government had approached the SC.

The bench headed by Justice B Sudershan Reddy rejected

Attorney General G E Vahanvati's contention, that there would be serious implications for formulation of future policies of the government in spectrum allocation, if the HC judgment was allowed to stand.

The bench not only rejected the argument outright but also upheld the criticism by the HC of the manner the government had gone about the matter.

The issue concerned the government suddenly advancing the cutoff date for considering applications for second-generation (2G) telecom licences. The government had been faulted in earlier HC verdicts for doing so, as this seemed to have benefited a few telecom companies.

The Attorney General argued that not every applicant could claim right to a licence and the government was only following a 'first come, first served' policy. The government said S Tel's application had not been rejected but only kept in abeyance for consideration as more telecom spectrum would become available.

The HC had held the communications ministry's notification advancing the cut-off date for granting licences (from 1October to 25 September, 2007) arbitrary and without any rationale. The SC declined to allow the government plea or to expunge the adverse remarks.

S Tel is a joint venture between the Chennai-based Sivasankaran group (usually termed the Siva group) and Bahrain Telecom; with the latter holding a 42.7 per cent stake. The telco has a subscriber base of 800,000 in the telecom circles of Himachal, Bihar and Orissa.

Counsel for S Tel had told the SC that market conditions had changed drastically since 2007 and the earlier proposal (for telecom licences in certain circles) was not economically viable any longer for it.

S Tel's counsel read out the apology filed in the court yesterday which was accepted by the judges. He said that the changed market conditions, severe competition, increasing number of operators in certain service areas and new technologies like 3G and 4G had forced the company to review its business strategy.

However, Janata Party president Subramanian Swamy, who intervened in the matter, opposed the centre's plea for disposing of the SLP filed by it in view of the understanding reached between the ministry and S Tel contending that the High Court findings were crucial to pursuing the case further as it involved a Rs60,000-crore scam.

He said he had written to the prime minister Manmohan Singh seeking sanction for prosecuting communications minister A Raja but had received no reply so far. The Central Bureau of Investigation and the Central Vigilance Commission were also probing the spectrum allocation allegations.

Analysts say, the ruling would have major implications for the spectrum allocation rules under formulation by the regulator.

They say the court's decision could be interpreted as striking down of the cap on the number of players.