In a significant boost for telecom operators Bharti Airtel and Vodafone Idea (Vi), the Bombay High Court on Monday (June 8) struck down the Centre’s one-time spectrum charge (OTSC) demands, quashing a long-running liability estimated at more than Rs 24,000 crore.The court also set aside all consequential actions taken by the government based on the disputed demands, delivering a major financial and regulatory reprieve to the two telcos.“We have come to a conclusion that the petitioners (the telcos) have been able to make out a case in their favour seeking quashing and setting aside of the impugned decisions and consequent demand notices. The respondent (Centre) has not been able to justify the said decisions and its action of levying one-time spectrum charge retrospectively upon the petitioners,” the court said in its order.However, the broader legal battle over OTSC remains pending before the Supreme Court. Here is what to know.Devices such as phones require signals to connect. These signals are carried on airwaves, which must be sent at designated frequencies to avoid interference.The Union government owns all publicly available assets within the country, which includes airwaves. These airwaves are called the spectrum, which is subdivided into bands with varying frequencies. To sell airwaves to private players, the Department of Telecommunications (DoT) under the Ministry of Communications regularly holds auctions.The current dispute traces its origins to the telecom licensing regime of the 1990s. Under the National Telecom Policy (NTP) of 1994, private operators such as Airtel and Idea Cellular were granted licences to offer mobile services, paying a fixed licence fee as well as separate charges for the use of spectrum.Story continues below this adHowever, the policy was overhauled in 1999 after the government found that the original framework had failed to generate the expected growth in the sector. Under NTP-99, operators were allowed to migrate to a revenue-sharing model, under which licence fees and spectrum-related payments were linked to a share of their revenues rather than fixed annual charges.Change in policyOver the following years, the government and the Telecom Regulatory Authority of India (TRAI) introduced a series of changes governing the allocation of additional spectrum.Explained | Airtel’s 5G priority tier: What is network slicing and how does it work?Operators that received bandwidth beyond the initial allocation were required to pay higher revenue-share-based spectrum charges. Industry bodies accepted this framework and withdrew several legal challenges, while successive policy documents and committee reports largely favoured recurring spectrum usage charges rather than upfront one-time levies.The debate shifted in 2008, when the DoT began exploring the idea of imposing a one-time charge on spectrum holdings beyond 6.2 MHz. A committee headed by then Additional Secretary at the DoT, Subodh Kumar, recommended an upfront payment mechanism for excess spectrum, and in 2010, the TRAI formally recommended a one-time spectrum charge for holdings above the threshold. The move gained momentum after the Supreme Court’s 2012 judgment in the 2G spectrum case intensified scrutiny of spectrum allocation and pricing.Story continues below this adIn November 2012, the Union Cabinet approved the levy of one-time spectrum charges on existing operators, including retrospective charges on spectrum held beyond 6.2 MHz from July 2008 onwards. The DoT subsequently issued demand notices to operators such as Airtel and Vodafone Idea, prompting them to approach the Bombay High Court in January 2013.The court granted interim protection against coercive action, and the matter remained pending for more than a decade before the judgment delivered this week.NewsletterFollow our daily newsletter so you never miss anything important. On Wednesday, we answer readers' questions.SubscribeWhat the verdict means for Airtel, Vodafone IdeaThe judgment is expected to materially improve the financial position of both Airtel and Vodafone Idea by eliminating a sizable contingent liability that had remained unresolved for more than a decade. The court has also disagreed with a 2016 Madras High Court judgment in the Aircel case, which had upheld a similar levy.Story continues below this adIn its ruling, the High Court held that the government could not retrospectively alter the financial terms of telecom licences and impose fresh liabilities years after spectrum had already been allocated. The judgment effectively nullifies the Centre’s 2012 decision.Also Read | Why tariff hikes by Airtel, Jio,Vi were inevitableIn 2023, Airtel had disclosed to stock exchanges that its dues stood at Rs 15,178 crore, of which it had paid Rs 8,500 crore, while the remaining Rs 6,600 crore was classified as a contingent liability. Vodafone Idea, meanwhile, had reported OTSC-related dues of around Rs 7,000 crore, including Rs 3,322 crore linked to erstwhile Idea Cellular. Industry analysts estimate the verdict could translate into cumulative relief of more than Rs 24,000 crore for the two telecom operators by removing the liability and associated uncertainty from their books.For Vodafone Idea, the relief is particularly significant, given the company’s stretched finances and ongoing efforts to secure fresh funding and expand its network. Any reduction in potential liabilities is likely to improve its financial metrics and could bolster confidence among lenders, investors and equipment suppliers.Airtel, while financially stronger, also stands to benefit from the ruling through a reduction in contingent liabilities and improved visibility for future obligations. The company has consistently maintained that the retrospective levy lacked contractual backing, and the judgment removes a long-standing regulatory overhang from its books.Story continues below this adThe ruling could also improve investor sentiment towards the telecom sector more broadly by reinforcing the principle that financial obligations imposed on operators must be grounded in licence terms and established policy.