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Monday, 06 December 2010 00:00
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Kapil Sibal's focus on just the procedural irregularities could pose problems in the future
Since Raja's 2001-price policy hasn't been overturned, does this mean the next 85 firms will get licenses at Rs 1,651 crore
So how does it feel to be vindicated, for Raja to be forced to resign, for 85 of his 122 licences to be cancelled—that’s pretty much the standard question in private conversations, on panels and television shows, to almost any journalist who has written anything spelt R-A-J-A in the last three years and more. Some preen, some simper, almost no one thinks they may have declared victory a tad too early.
Yet, this is a line worth pursuing, if only for a bit. Stories have already started appearing in newspapers, and it’s only a week since new telecom minister Kapil Sibal said he’d issued a show cause notice to 85 licensees, about how the telecom regulator (Trai) got it wrong, on how the CAG’s observations weren’t quite kosher. So, one news story says that while Trai has recommended cancellation of 69 licences and penalties on others, it has given different suggestions for firms who’re guilty of the same thing, not rolling out their networks. Another quotes a show-caused firm as saying the CAG point about the firm having filed its amended Articles of Association later with the ministry is irrelevant (CAG said the Registrar of Companies data showed that some firms who had applied for telecom licences got their Articles amended after they had applied and were therefore ineligible). According to the firm, quoted in the news story, its lawyers had said the relevant date is the one when the Board passed the resolution, not the filing with the RoC.
Some of this is absurd and won’t stand scrutiny, but some sounds logical enough to lead to the prospects of a legal battle. So, after a while, be sure you’ll hear the usual lot of but-so-much-has-already-been-invested or the-company-has-changed-hands-so-why-cancel-the-licence (think NTP 1999 and think UASL 2003). You will, it’s almost certain, hear the stuff you heard in 1999 when incumbent operators who were unable to pay their licence fees turned around to show paperwork to prove the government didn’t give them spectrum, some waiver, some permission, some joint signature at the bank … A lot depends on how resolute the government is, and while it is today, that could well change tomorrow—witness the flip flop on the CVC. One day the government is putting pressure on him to resign instead of sacking him, the next day he’s saying he’s very much there.
Keep in mind also the funny stuff that’s happening in the Supreme Court where, despite the government asking Raja to go, removing his key aides and even beginning to cancel the licences he issued, the government’s affidavit remains unchanged! That’s right, the government’s stance in the Supreme Court is still that Raja was just following the Trai recommendations, that not auctioning the licence/spectrum was in the interest of keeping call tariffs low, that keeping infrastructure costs low (or is that raising teledensity?) was part of what the 10th Plan (or was it the 11th?) vision statement—all the half-truths and the plain untruths Raja spouted continue to remain part of the government’s official affidavit. Indeed, from what’s being reported on a daily basis, the focus of the government counsel is to defend the no-auction-2001-price stance of Raja’s while shifting the focus on to Raja’s procedural lapses. Yes M’lord, I agree the 45 minute window Mr Raja gave for firms to deposit their bank drafts was unfair; I agree Your Honour, the decision to change the First Come First Served rule to the time-of-payment instead of time-of-application cannot possibly be justified … Not a word on the price though.
That Raja is being hung to dry isn’t in itself a bad thing, but consider the possibilities that arise from Sibal not focussing, at least in a public fashion, on the illegality of charging the 2001 price in 2008. The government has still not accepted the Trai recommendations on limiting the number of telecom firms in each circle, so if and when it cancels the licences given to 85 firms on technical grounds, does this mean it will automatically give these to the next 85 firms on the list? And at the same Rs 1,651 crore that we know is a sixth or less of its true value? So, whether he wants to or not, Sibal has to address the issue of whether the non-auction process was legally valid or not.
Sibal also needs to take a call on the Trai recommendations of May 2010. Apart from the issue of the cap that’s been discussed, there are several others that are critical to the industry’s health. There is, for instance, the recommendation that the new bargain-basement telcos, who paid a sixth or less for their licences that came bundled with 4.4 MHz of spectrum, be given another 1.8 MHz of spectrum free. There is the recommendation that spectrum fees be increased dramatically for those firms who have higher amounts of spectrum, those with 10 MHz should pay an annual 6.9% charge instead of the current 4%. There is also the suggestion (this is subject to a final recommendation some time around now) that when the current licences expire for the older telcos (this will start in another 4 years or so), the spectrum they have be taken back and allotted for 3G services, and the firms be given some other spectrum instead—and yes, the licences should be renewed keeping in mind the 3G auction bids. Imagine the situation, the new telcos will have licences for which they paid Rs 1,651 crore while the older ones could end up paying 10 times as much when their licences are renewed—3G prices for an all-India licence were Rs 16,750 crore. Another reason for Sibal to visit the valuation of Raja’s licences.
The next time the Raja-slayers are congratulated, they’d be well advised to remember the old saying from my village, a little casteist though: Jaat mara jib janiye, jib tehravein hole … wait for the 13th day ceremony before you finally pronounce that a Jaat is dead. In this case, that’s when all 122 licences are auctioned off to new firms.

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