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Thursday, 13 October 2011 00:00
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Intro: Sibal has long-run plans -- by then the telecom industry may be dead

 

A decade ago, when McKinsey’s top brass presented a strategy to raise India’s GDP growth to 10 per cent a year, they put a growth number to each reform — reforming land markets would raise annual GDP by 1 percentage point, say. At the end of the presentation, a visibly impressed then-Prime Minister Atal Bihari Vajpayee had just one question: “Who is going to be doing all this?”

Much the same applies to Telecom Minister Kapil Sibal’s grandiose new telecom policy. It has absolutely all the right stuff, but who’s going to ensure it happens? One licence for all services (an extension of Arun Shourie’s universal access service licence that merged fixed line and mobile phone licences in 2003) is a good idea, and will allow, for instance, Mukesh Ambani’s broadband Internet service to offer voice services as well — given India’s such a voice-centric market, that’s good for him and, in any case, if the technology allows it, putting restrictions is silly. Similarly, having a separate category of “network operating companies” will allow, say, a Nokia or a Siemens to buy large amounts of spectrum, which will increase spectrum efficiency dramatically, and then rent this out to telcos like Vodafone and Bharti. Companies are to be allowed to share their networks, even sell bulk minutes to resellers who will then sell them to retail customers. There are a host of other such ideas. Removing roaming charges, similarly, will allow Indians to roam without having to pay higher charges — once again, this is an extension of Dayanidhi Maran’s OneIndia policy that saw STD rates fall to around those for local calls.

All of these, to the extent they actually happen, are long-run solutions. But, as Keynes said, in the long run, we’re all dead. The industry has short-run survival issues, but there’s nothing being done about those. Going by even the vastly lower subscriber additions we’re now seeing, India will have a billion mobile phone users in a few years and 175 million broadband Internet users if Sibal’s “broadband now” dream is to fructify. So the industry desperately needs additional spectrum now, as broadband guzzles spectrum; but Sibal is promising it in 2017 and 2020!

Sibal can make a lot of this available today: TRAI, the telecom regulator, has recommended cancelling 70 of Raja’s 122 licences for not fulfilling their licence obligations, and that will release around 14 MHz of spectrum on an all-India basis. Sibal, however, is refusing to do this, even though TRAI has got opinions from retired Supreme Court judges after the government refused to accept its recommendations the first time round. Indeed, in the policy, he has talked of an “exit” policy for Raja’s licencees! In keeping with the contradictions that have been the hallmark of the government’s handling of the 2G case, Sibal began his policy statement by grandiosely saying revenue generation would not be the cornerstone of the new policy (suggesting that auctions, which Raja was also against, were a bad idea), and then said that all new spectrum would be auctioned.

Let’s assume that Sibal can’t talk of cancelling licences since the Supreme Court is yet to take a view on it. But surely a forward-looking policy should have been talking of changed M&A norms? Even if you assume the court cancels the licences and Datacom with 4.4 MHz is up for sale, who can buy it? The existing rules have all manner of caps on how much spectrum can be held by telcos, which make it difficult for a big player to buy even a small one.

All of which adds up to a pretty big credibility gap. How big is of course best seen from the fact that while the new policy envisages spectrum sharing, the government is currently taking action against telecom firms for sharing spectrum for 3G services. The telecom ministry is saying that if, say, Idea doesn’t have a 3G licence for Delhi, it cannot offer this to its subscribers in Delhi — it does so right now through a roaming agreement with Vodafone, say, which has a 3G licence in Delhi. That’s ridiculous for a variety of reasons. For one, the government loses no revenue through such agreements. Two, it increases competition — with just three players in each circle (MTNL-BSNL are so inefficient, you can rule them out as effective competition in most places), 3G tariffs would shoot up if roaming didn’t happen. Three, the licences very clearly allow this. Four, whether such intra-circle roaming would be allowed was specifically asked before the 3G/ BWA auctions took place and the government said it would be.

Or take the case of Qualcomm. Fifteen months ago, when the government wanted to ensure higher participation for its 3G/ BWA auctions, it said foreigners could apply and complete the formalities later. Qualcomm won 4 telecom circles and paid a billion dollars for it. Today, for an Internet licence that is available freely, Sibal’s ministry has the gall to say its application has been rejected. The announcement of a policy is a huge-eyeball moment, so it’s not unnatural that a Sibal should want to be part of it, but surely it’s a good idea to focus on the immediate and fix the anti-industry behaviour?

In the short-run, costs are only going to increase for the industry. The diktat on roaming will shave 4-5 per cent from the industry’s earnings, and annual payouts are likely to increase on account of the one-licence plan — while TRAI wants a uniform 6 per cent charge on revenues, the telecom ministry favours a higher 8.5 per cent. Once the courts rule on it, the ministry will probably ask the older telecom firms to pay for the “extra” spectrum they have — this could be Rs 36,993 crore, going by the CAG numbers. Never mind that the annual licence fee/ spectrum charges were hiked for these players once they got the “extra” spectrum, so they’re paying a higher charge anyway.

Yet, they’re told not to worry since their future is going to be brighter. A bit like telling people not to worry about their lousy here-and-now but to focus on the apsaras in heaven.

The writer is opinion editor, ‘The Financial Express’, This e-mail address is being protected from spambots, you need JavaScript enabled to view it

 

 

 

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