Trai fixes some of the damage after 17 wasted months
Considering how telecom has been at the forefront of the damage to the India story, it is only fitting that it be part of the attempt to bring back a little bit of the shine. The damage, to telecom and to the government, began with then telecom minister A Raja handing out licences to a chosen few firms at bargain-basement rates in 2008; the damage got compounded when, after the Supreme Court cancelled the licences issued by the government, the authorities never offered to even compensate those who had officially paid market prices—to the private players who benefited from Raja’s largesse—for these. If this wasn’t bad enough, and we’re not even talking of the retrospective Vodafone tax amendment in last year’s budget, the then Trai chief came up with suggestions that completely choked off the market. After Raja’s largesse had left telcos so starved of spectrum, they had no option but to bid astronomically for 3G spectrum in 2010—in 2012, when the economy was in the dumps, when most telcos were bleeding, Trai under JS Sarma decided to use this 3G bid as the base price for 2G auctions. And after recommending that the existing and more efficient 900 MHz spectrum of operators be taken away for ‘refarming’, Sarma’s Trai went and jacked up the price of such spectrum to 2 times that for the 2G spectrum.
All told, this was a recipe for disaster, and it didn’t help that the telcos were also being asked to pay retrospectively for the spectrum they held supposedly in excess of what their licences permitted. This was also the period when the telecom ministry was going after telcos for providing intra-circle roaming even after saying it was okay during the auction process; this was the time when, after delaying giving Qualcomm the licence it won in a government-bid by over 18 months, the government shaved off 18 months from the licence—this was then restored by the court. Since this was also the time investors were shying from the country and talking of investing overseas, the government should have referred the matter back to Trai which now had a new chief. Instead, it tried to arm-twist telcos to bid by saying unless they took part in the auctions and bought spectrum at the high prices, their existing licences wouldn’t be renewed. The telcos, however, were too cash-strapped to give in even if they wanted to. After 17 wasted months, Trai has finally come out with a new set of recommendations, cutting the base price of the 2G auction by 37% in aggregate terms but by 55% in key circles like Delhi and Mumbai. While the 900MHz spectrum will still have to be surrendered for ‘refarming’, telcos can bid for it again. In the case of circles like Delhi and Mumbai, the 3G base price has been lowered compared to that proposed by the earlier Trai by about two-thirds. Given the current regime of charging users an annual spectrum usage charge (SUC) based on the amount of spectrum they held was regressive, and unfair, this too has been changed. For one, given that larger chunks of spectrum increase efficiency, higher SUC charges penalised the efficient. Second, since spectrum amounts were not added up over GSM and CDMA mobile phone systems, this meant CDMA-mobile firms got an unfair advantage. By fixing a flat rate, Trai has taken care of this. If the Vodafone case is resolved amicably, that will dial closure to one of the saddest sagas in India’s growth story, of bringing a vibrant industry down to its knees.