|Sibal dials right number|
|Wednesday, 13 April 2011 00:00|
Telecom minister Kapil Sibal’s announcement that, when it is finally announced, the New Telecom Policy 2011 will delink licences from spectrum is a big leap forward in cleaning up the mess that A Raja and various recommendations by the Telecom Regulatory Authority of India (Trai) have created. While Raja’s largesse resulted in a situation where his favoured firms got spectrum at a fraction of its market value, Trai recommended putting the older players at a further disadvantage. While firms like Uninor paid a fraction of the 3G spectrum auction-costs for their spectrum, Trai recommended that firms like Bharti/Vodafone/BSNL/MTNL would pay 1.5 times the 3G rates—for their extra spectrum right now, and at the time when their licences came up for renewal starting 2014. By saying that no spectrum will be given when licences are renewed—it will have to be bid for—Sibal has ensured there will be no scope for favouritism of the Raja kind or through flawed reasoning of the Trai kind in the post-2014 period. There will, of course, be a problem when the Bhartis and Vodafones pay 1.5 times the 3G price for their extra spectrum while the post-2014 spectrum they will get can be at lower auction-determined prices—this, however, is a legacy issue and may need to be endured if it cannot be cured.
There are, however, some areas that need some more thought if Sibal’s overarching objective is to be achieved. The easier M&A norms Sibal spoke of are an urgent need, but there is no reason why Sibal should want 6 players to be there in each circle at any point in time. It is better than today’s 14, but there is enough evidence to show that 3-4 players are enough to ensure competitive pricing in most industries, including telecom—in any case, since the existing law only speaks of four players, Sibal may end up making M&A even more restrictive! The 10% cross-holding limit, similarly, is largely irrelevant once there are more than 3-4 players. But, most important, if M&As are to take place, the cap of 15 MHz for a merged entity is the surest way of ensuring no M&As take place—one of the big drivers of M&A is the larger amounts of spectrum available and the consequent savings that result from larger spectrum amounts. Interestingly, Trai has recommended this cap be lowered to 14.4 MHz. Since Sibal has till the end of the year to come out with NTP 2011, hopefully these glitches will be ironed out by then.