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Telecom VDIS PDF Print E-mail
Wednesday, 29 October 2003 00:00
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The best thing that can be said about the Telecom Regulatory Authority of India’s (TRAI) proposal on the cost of a unified licence (Rs 1,096 crore), and the Rs 485 crore penalty imposed on Reliance Infocomm for violating its licence by offering facilities like call-forward and multiple-registration, is that it belatedly recognises the breach was a serious one.
 
And since the TRAI decision has been welcomed by the telecom minister, Arun Shourie, as well as by Reliance, presumably this means the guilt has been accepted as well — for the past seven weeks, since the August 8 judgment by TDSAT, the government did precious little about Reliance’s transgressions.
 
First, it sought legal opinion on whether the TDSAT judgment required it to take any action against the WiLL-mobile firms, and when the opinion was that action was required, the ministry dumped the responsibility in the lap of the Group of Ministers! Against that background, the TRAI proposal is a major step forward.
 
The question now relates to the number chosen by the TRAI as penalty. If Reliance was complying with the law and offering only limited mobility (in the sense that a user in Delhi would not be able to use his phone in even Gurgaon), it would not have been able to get the 5 million subscribers it has notched up in barely six months, and a large part of these would presumably have gone to the genuine cellular players.
 
In the last 11 months for instance, Tata Teleservices, which offers only limited mobility, has been able to get just 3.8 lakh subscribers, as against Reliance’s 28 lakh in the six circles the companies have in common.
 
If you assume, optimistically, that Reliance would have been able to notch up half the subscribers it has today even with limited mobility, what TRAI is saying is that Reliance can pay Rs 485 crore to legitimise 2.5 million subscribers — that’s Rs 1,940 per subscriber.
 
Yet, if you look at telecom deals in the recent past, the cost paid to acquire subscribers is much higher.
 
While Telekomsel in Indonesia struck a deal at around $ 900 per subscriber last year, Escotel’s deal with investors fell through at $ 400 valuations seven months ago.
 
Based on Bharti’s current share price, the cost per subscriber is $ 500. Even if you take a conservative cost per subscriber of $ 250, Reliance has gained by around Rs 3,000 crore but is being asked to pay Rs 495 crore as penalty.
 
Also, since Reliance’s huge subscriber base has been at the expense of the cellular operators, it’s difficult to see why the money should accrue to the government and not the cellular players.
 
Essentially, the TRAI proposal looks like another variant of the Voluntary Disclosure of Income Scheme (VDIS) of the late 1990s — people who didn’t pay their taxes in times of higher tax rates were encouraged to come clean later when the tax rates were more reasonable.

 

 

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