Vodafone’s licence renewal plans frustrated in India

India’s Department of Telecom has rejected a request by Vodafone for automatic renewal of seven of its expiring mobile operator licences.

The company will instead be required to buy one of the replacement unified licences, then bid in an open auction for the necessary radio spectrum.

The licences in question cover Kerala, Tamil Nadu, Haryana, Rajasthan, Uttar Pradesh East, Maharashtra and Gujarat. As with the company’s dispute in Kolkata and Delhi, it was awarded the licences in 1995, with an option to renew for an additional 10 years when they expired – subject to an agreed renewal fee.

The government has however been blocking renewals, seeking initially to simply re-auction the licences, and now to change them into a different form of licence.

The government argues that the telecom market has changed too dramatically since the licences were originally awarded and that to renew them for another 10 years overlooks the opportunity to include the changes into new licences.

An option by the government to guarantee renewal of the radio spectrum, which is the main risk in the current offer, does not appear to be favoured. At the moment, in theory, Vodafone could buy the unified licences, but then be outbid by someone in the radio spectrum auction – rendering its operations worthless.

Vodafone has appealed the dispute in Kolkata and Delhi, and may do so again with the latest licence renewals.