"DoT has said that clause related to extension of licences, companies should not read 'may' as 'shall' extend licence. Hence their request to extend licences have not been accepted by DoT," sources said.
Sources added that similar letter will be sent to Bharti Airtel as well.
Companies when contacted did not offer any comments immediately.
Vodafone, Loop and Airtel have approached court against government's plan to auction spectrum that they currently hold and has sought extension of licence using the same spectrum.
The telecom firms contended that they have in their possession the 900 MHz spectrum since November 1994 and without considering their plea for renewal of licence.
Sources said that DoT has asked these companies to participate in spectrum auction to retain the spectrum and continue their services.
The spectrum identified for auction in 900 Mhz includes 8 Mhz held by Bharti Airtel and Vodafone each in Delhi circle; 8 Mhz each of Loop Mobile and Vodafone in Mumbai; and in Kolkata 6.2 Mhz spectrum of Bharti Airtel and 7.8 Mhz of Vodafone that is due for renewal in 2014.
The auction of these spectrum was scheduled to start from March 11 but none of the companies applied to bid for these airwaves and hence it failed.
Government has announced that it will conduct third round of auction but details of this auction have not been announced yet.