2G judgment destroyed telecom sector, SC told

Telecom firms, which have appealed in the Supreme Court against a high court ruling upholding the regulator's decision to slap call drop compensation charges on them, on Tuesday claimed that the court ruling mandating spectrum auction in the 2G case had virtually destroyed the sector and left it mired in debt.

They also claimed that their return on investment was less than 1 per cent in all these years that they have invested in the Indian market, contesting the Attorney General's claims that they were making huge profits but not investing enough in infrastructure, which was leading to dropped calls.

Kapil Sibal, lead lawyer for the telcos, reiterated his zero-loss theory as opposed to the Comptroller and Auditor General of India's estimate of Rs70,000 cr loss to the exchequer from arbitrary allocation of spectrum.

"The 2G judgment has destroyed the sector. We will end up in the BIFR (where companies go for winding up). We are Rs3,80,000 cr in debt," Sibal told a bench of Justices Kurian Joseph and R F Nariman.

"The principle laid down by the court - of auction of every natural resource - has destroyed the sector. They attacked me for speaking about zero-loss, but I spoke my mind. This principle will ruin the coal and the steel sectors as well and destroy the substratum of the Indian economy. In the coal sector those who won in auctions are now returning the blocks," he said.

He claimed that the telecom sector was not doing too well after the decision to auction spectrum.

"From Rs1,688 we are now paying Rs45,000 cr for spectrum per operator. Trai (the Telecom Regulatory Authority of India) did not tell this to the court. Who pays for this? How do I pay for it?"

He also accused the government of artificially creating a scarcity of spectrum by not putting it all up for auction to increase spectrum prices.

Trai, he charged, was misleading the court with wrong facts in a bid to prejudice it. Private telecom players in India cannot be compared with state-owned units in China which get spectrum for free. "Every time a call drops, the consumer suffers, but so do I. Why would we want a call to drop?"

He also argued that the Indian telecom market was very different from the market elsewhere in that India has the lowest tariffs in the world. The consumer has no capacity to pay, so 96 per cent of the consumers are pre-paid consumers.

Enumerating on the sector's contribution to the economy, he said that the sector was the highest contributor in foreign direct investment and had contributed Rs70,000 cr per annum to the exchequer. It contributes 6 per cent to the GDP and employs 2.2 lakh people directly and another 2 lakh indirectly.

Despite a debt of Rs3,80,000 crore, the sector had the largest investment in the economy to the tune of Rs80,000 crore.

He also contested the AG's claims that the telecom companies were not investing in cellphone towers while picking up more and more subscribers. "We have set up more than 2 lakh sites in the last 15 months. In fact, one site is set up every three minutes," he said.

He accused the regulatory body of washing its hands of the conducive atmosphere it was supposed to provide for telcos to flourish. "Their attitude is 'I don't care if you don't get municipal permissions, I don't care if you don't have the right of way. We need revenues.' This is not the way the government should be asking for money."

His arguments concluded the hearing on the challenge by telecom companies to a high court ruling upholding the charges at the rate of Re1 per dropped call subject to a cap of three calls a day.

Consumer organisations and activists also argued in court today in favour of the charges, saying that any statutory mechanism doesn't oust the right of the consumer to fair compensation. The court reserved its judgement on the issue.