The Department of Telecommunications (DoT) has formed a six-member panel to ascertain, among other things, how to “safeguard” the value of public resources, such as spectrum, in cases where telecom operators have filed for insolvency.
“The panel will look into three areas: the position of the DoT in terms of auction rules and licence conditions in cases where telcos file for insolvency; the legal position vis-à-vis licensed resources and as a creditor, in terms of recovery of dues; and the precautions or actions DoT can take to safeguard the value of resources like spectrum from getting locked in unproductivity or being disposed at sub-optimal prices consequent to the resolution process,” a senior DoT official told ET.
The panel, to be chaired by Shiwa Shankar Singh (member, technology), has been formed at a time when two telcos – Aircel and Reliance Communications (RCom) – are battling bankruptcies. While Aircel filed for insolvency under the Insolvency and Bankruptcy Code 2016 in March last year—the month it shut its mobile telephony services, RComNSE -3.45 %, which shut down its wireless operations at the end of 2017, has also moved the relevant tribunal to start insolvency proceedings for itself.
Both Aircel and RCom have chunks of spectrum in the 850 MHz, 900 MHz and 1800 MHz bands lying mostly unused. RCom is sharing its 850 MHz band airwaves with Reliance Jio. Under the insolvency process, the resolution professional tries to sell off assets – in this case spectrum is the most critical asset of a telco – but usually the value that it gets, even through a bidding process, is less than the market value. If the RP can’t find bidders, then the company goes for liquidation, in which case the value erodes further.
“Spectrum has been internationally acknowledged as a scarce, finite and renewable natural resource which is susceptible to degradation in case of inefficient utilisation. Spectrum lying idle is a waste of natural resource,” the official said.
The Supreme Court has mandated that all airwaves for commercial use need to be auctioned, which would ensure that the government gets the market value for the public resource.
“These incidents do not have precedence and, therefore, we will have to look into them for the first time,” another official said.
According to this person, RCom has signed a tripartite agreement with the government and one of its banks, which allows the lenders to sell spectrum to another licence holder or a company that has applied for licence and meets DoT’s approval. But Aircel has no such agreement. “This is the grey area which the DoT will have to look into,” the official said.
In the Mobile World Congress held in Barcelona in February, Sunil Mittal, chairman of Bharti Airtel, had objected to the idea of an RP selling spectrum. “First of all, my fundamental thing is that the spectrum belongs to DoT and how will it be sold by anybody else?” he had said.
Mittal added that DoT should have confiscated the airwaves of companies who were not paying their dues, and those airwaves be added to the auction pool. Aircel and RCom have not paid spectrum related dues to DoT. DoT’s attempts to recover dues have been embroiled in legal cases, especially as these companies have invoked the insolvency code.
