|Tata to Raja's scam|
|Tuesday, 30 November 2010 00:00|
Raja gets India Inc's most respected to bat for him
It's difficult to understand what Tata means by hoarding spectrum -- Bharti has 8.7 lakh customers per MHz per circle compared to 5.2 lakh for the Tatas
Ratan Tata has struck all the right notes when he said that the Niira Radia tapes violate the right to privacy and the government has a lot to answer for. While no one questions the government’s rights to tap a citizen’s phones, for an income tax investigation say, the government is honour-bound to protect the data—so, at some point, the I-T department and/or the CBI to whom it gave the tapes to help along with its investigation, has to explain how the information leaked. As FE has argued editorially, protecting the right to privacy gets even more critical as the government starts collecting more and more information about its citizens, through the UIDAI, for instance.
The problem, however, is in the other things Tata has said, starting from his description of the CAG report as the ‘so-called scam’, and then going on to say the real scam is the ‘out-of-turn allotment of spectrum, hoarding of spectrum by important players (read Sunil Mittal) for free’. Based on all this, Tata has said the government needs to ‘bring (in) an auditor’—what does he think the ‘A’ in CAG stands for? Tata has gone on to say the calculation of the loss to the exchequer on the basis of the 3G auction ‘looks somewhat like a hindsight issue’ and concludes by saying ‘what is unclear to me is what really is the scam?’ This is especially ironic since, in 2005, it was Tata who was the only Indian industrialist in the field to say that spectrum should be auctioned—at that time, Sunil Mittal had said that if Tata had so much extra money, he would do well to send it to the Prime Minister’s Relief Fund.
First, it has to be pointed out, the CAG report has not calculated the loss only on the basis of the bids received in the 3G auction—this, by the way is not incorrect, since Tata’s own company has just come out with tariff plans for its 3G offerings that are comparable to the current 2G tariff offers of most companies. The CAG has three other loss calculations, based on the prices at which various new telcos sold their equity—this ranges from Rs 57,000 crore based on the price Swan got to Rs 70,000 crore based on the price Unitech got.
More important, the Tata group is a big beneficiary of Raja’s policy—of the Rs 1,76,000 crore loss the CAG talks of, Rs 37,154 crore is due to what’s called ‘dual technology’ licences. These are the licences given to firms like the Anil Ambani group and the Tatas, firms that already had CDMA-based mobile phone licences but were now also given GSM-based mobile licences. So, if Unitech and Swan got licences at a sixth or less of their actual value, so did the Anil Ambani group and so did the Tatas. Indeed, while the law doesn’t allow any telco to hold more than 10% equity in another telco in the same service area, dual-technology allows this. In that sense, the benefit to the dual-technology firms extends to beyond that given to firms like Unitech and Swan.
There is little doubt, as the CAG says, that firms like Bharti and Vodafone that have got spectrum beyond 6.2MHz should pay the market price for it, since there is nothing in their licence conditions that says they should get spectrum without paying for it. There are various figures for losses, ranging from Rs 13,000 crore to Rs 36,993 crore for this, depending on whether you use the Swan figure or the 3G one. But let’s get some perspective on this. Firms like Bharti and Vodafone have paid an extra spectrum charge for this every single year, at a rate that’s roughly 25% more than that paid by other firms who don’t have this ‘extra’ spectrum—the spectrum charge is an annual levy based on the revenue a firms earns from the spectrum it holds. This, in the case of Bharti, works out to around Rs 75 crore in the latest quarter, or around Rs 200 crore a year. Given Bharti’s licences are for another 5 years or so, it will end up paying at least another Rs 1,000 crore—the actual figure will be higher, given how telecom revenues are growing, but let’s keep it simple. If Bharti’s paying Rs 1,000 crore, the industry figure will be around Rs 4,000 crore—add to this the Rs 3,500-odd crore of ‘extra’ spectrum fee firms like Bharti have already paid in this manner in the last 3-4 years. Net net, Bharti et al have clearly benefited and Tata is right when he talks of this, but the benefit to them is probably a half what the CAG has estimated.
The same probably applies to the issue of ‘hoarding’ spectrum where firms like Bharti are servicing 8.7 lakh subscribers per MHz of spectrum per circle (on an all-India basis, Bharti is servicing 1.9 crore subscribers per MHz of spectrum), 8.2 lakh for Vodafone, 5.8 lakh for Reliance and 5.2 lakh for Tata and next-to-nothing for the new players.
As for Tata’s complaint of the lack of a level playing field, which is one of the issues Niira Radia was supposed to help address, Tata is right in saying that others like RComm have got spectrum in all service areas while the Tatas haven’t. Indeed, this comes from the fact that RComm paid its licence fee even before the policy was announced. But this doesn’t detract from the fact that, in the circles he got dual-technology spectrum, Tata has benefited. Indeed, in 2001, when Ram Vilas Paswan came up with the fiction of WLL licences, which allowed firms with land-line licences to offer limited mobile services, and in 2003 when this was converted to full-blown mobile licences, the Tatas have benefited each time around.
So let’s listen to Ratan Tata when he raises the issue of the government’s job to protect the privacy of its citizens. But let’s keep the issue of favouritism in issuing telecom licences separate from this debate.