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Tuesday, 09 October 2012 00:00
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EGoM loses opportunity to clean dual-tech mess

With the Empowered Group of Ministers (EGoM) finally agreeing to a one-time fee for the ‘extra’ spectrum that telcos had over their licensed 4.4 MHz, the government is close to reaching 40% of its projected R40,000 crore budget target from spectrum fees—this, of course, assumes the telcos don’t go to court, and that’s a big assumption. While the one-time fees, to be levied prospectively from when the Cabinet clears the EGoM’s recommendation, adds up to around R27,000 crore for the industry, around R11,000 crore will have to be paid out by the PSUs BSNL (R6,250 crore) and MTNL (R4,640 crore) and so is a transfer from one hand of the government to the other—neither of the loss-making PSUs has the money to give. The EGoM has done well to ignore the attorney general’s advice to levy this charge only from 6.2 MHz as this would allow firms who’ve got 4.4 MHz—the ‘dual-technology’ Reliance Communications and Tata Teleservices—to argue that they were entitled for another 1.8 MHz of spectrum free.

By not taking both GSM and CDMA spectrum together while calculating the ‘extra’ spectrum, however, the EGoM has lost an opportunity to correct the anomaly that remained after the Supreme Court cancelled 122 of the Raja licences but failed to make any ruling on the Reliance/Tata ‘dual-technology’ spectrum—a case on this is pending in the Supreme Court. So, as things stand, both telcos will pay for the ‘extra’ CDMA spectrum they have over 2.5 MHz (this is the CDMA equivalent of 4.4 MHz of GSM spectrum), but neither will pay for the 4.4 MHz of GSM spectrum A Raja charged them just R1,650 crore for (this is worth R12,320 crore based on the reserve price of R14,000 crore for 5 MHz in the forthcoming auction). Had the EGoM added both types of spectrum while charging for the ‘extra’ spectrum, this unfair advantage would have been largely addressed. As things stand, after BSNL’s 11.97 MHz, RCom has 9.34 MHz of spectrum, Bharti Airtel 7.59 Mhz, Tata Teleservices 7.07 Mhz, and Idea Cellular 7.03 Mhz. But while BSNL will pay R6,250 crore and Bharti Airtel R5,600 crore, RCom would pay only R3,600 crore. Interestingly, if the EGoM had addressed these issues, the chances of telcos going in for litigation would have reduced since there would have been a ‘level playing field’.


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