India’s Supreme Court sent shockwaves through the country’s mobile sector earlier today by cancelling all 122 of the 2G licences that were awarded under controversial circumstances in 2008.

The cancellations will affect the eight start-up operators that have launched in the country in the interim period, notably Telenor-backed Uninor, Tata Teleservices, Loop Telecom and Etisalat DB. The networks will be allowed to operate for only the next four months.

The administration at the time – led by disgraced former telecoms minister A Raja – is accused of selling-off the 2G licences on a first-come-first served basis and potentially costing the country the billions it would have made if it had conducted a competitive bidding auction.

In cancelling the licences, the court declared that their award had been “totally arbitrary and unconstitutional,” reports the Financial Times. “This is a major step forward for us in the war against corruption,” said Subramanian Swamy, one of the petitioners in the case before the Supreme Court and the head of the Janata Party.

Several of the new licensees went on to sell stakes in their mobile units for large sums, including to foreign operators such as Norway’s Telenor and Etisalat of the UAE.

Telenor –which has seen 22 of its Indian licences cancelled – said in a statement it had “yet to review the ruling and will be able to comment further once we had a chance to review it.” Relations with its local partner in Uninor, Unitech Group, are already strained following the arrest last year of several senior Unitech directors on allegations of fraud relating to the award of its licences.

Meanwhile, Etisalat also issued a statement that attempted to shift blame to its local partner, Swan Telecom. “The Supreme Court decision relates to events that occurred in January 2008, well before December 2008 when Etisalat invested in Swan. Etisalat has no knowledge of what occurred in the licence application process for Swan, far less did it have any involvement.”

According to the Wall Street Journal, there was hope within the industry that the Supreme Court would reach a less drastic ruling, possibly by setting up an independent panel to study the license awards on a case-by-case basis – which could have allowed some operators to continue.