Vodafone India filed a petition in the Delhi High Court that challenges the Department of Telecommunications’ decision to reject its application for 2G licence extensions in the Mumbai, Delhi and Kolkata ‘circles’ (regions).
The court action comes after DoT failed to respond to a strongly-worded letter sent by Vodafone in early April, which complained that the government department was wrong to reject its renewal application (made in December 2012).
According to the licence agreement, argued Vodafone, the government can extend the period of licence by ten years at a time if a request is made by the operator during the 19th year of the licence period.
The 20-year licences up for renewal, covering the 900MHz and 1800MHz frequency bands, are due to expire in November 2014.
The letter furher pointed out that DoT is obliged to propose new terms and conditions for renewal. However, as no such terms were provided – despite several requests – Vodafone concluded that DoT had not properly considered Vodafone’s application.
“DoT arbitrarily rejected Vodafone’s applications for extension without due consideration of the substantive points raised,” said Vodafone India in a statement on 9 May, according to local press reports.
Vodafone’s court action comes at a time when its long-standing $2.6 billion tax dispute with the government looks like it will drag on for another year at least.
According to a report in the Financial Times, dated 7 May, a series of legal and political barriers are preventing progress.
Tax experts and legal analysts, according to the report, say any chance of progress is unlikely until after India’s forthcoming national election in 2014.
A bleaker prospect for Vodafone shareholders is that no compromise will be reached at all.
“There will be no settlement, it isn’t remotely heading in that direction,” said Arun Giri, the head of Taxsutra, an Indian tax information service, quoted in the FT report. “There is huge resistance from the income tax department to letting Vodafone get off.”
A spokesman for Vodafone said “we are in discussions with the Indian government and we hope to be able to reach an amicable solution”, but declined to comment on the negotiations.
The tax dispute with Indian tax authorities is related to Vodafone’s acquisition of Hutchison Whampoa’s Indian operations back in 2007.