Showing posts with label TRAI. Show all posts
Showing posts with label TRAI. Show all posts

Monday, August 20, 2012

TRAI was expected to facilitate the growth of the telecom industry

India’s telecom ‘regulator’, TRAI was expected to facilitate the growth of the telecom industry. While growth created history, TRAI’s excesses also succeeded in doing the same

The second case relates to the new set of proposals that TRAI has conjured up on spectrums and M&A. The proposals state that operators holding 2G spectrum over and above 6.2 MHz up to 8 MHz should pay a one-time additional charge, linked to the current prices of the 3G spectrum! Beyond 8 MHz, the price would be 1.3 times the current 3G price! The payments would be on a pro-rata basis; Bharti, Vodafone and BSNL hold 10 MHz spectrum in certain key circles, while Idea holds up to 8 MHz and the proposal would spell doom for their already dwindling profits. If you thought that that was enough to prove that TRAI was not “collaborating” with private operators, hold your conclusions – amazingly, Anil Ambani owned Reliance Communications is the only operator in the green, post the recommendations as it holds less than 6.2 MHz in all circles except Bihar. Similarly, R-Comm will also get top priority while getting additional spectrum as it is the first company to already possess start up spectrum. How would that matter? Mysteriously, TRAI has proposed top priority for operators with existing start up spectrums – this means that players like Tata Teleservices will face the barrel with no startup spectrum. This would also mean that new players, without any startup spectrum, are being told they possibly cannot get any spectrum. And one thought TRAI was supposed to provide a level playing field?

The argument that TRAI is working for the consumers, can be summarily dismissed as being nonsensical. Till 2007, there wasn’t even a formal provision in the Act for consumers’ complaints redressal. From unbelievably avoiding the implementation of ‘number portability’ to arbitrarily implementing pricing plans (When Tata Docomo’s per second pulse plan became famous, TRAI suddenly wanted to make per second billing mandatory for all mobile operators), TRAI has failed miserably in the critical job of being a model regulator. In the wake of advent of 3G and the near future 4G services in India, the need for a super regulator to monitor TRAI and other regulators deserves stronger consideration than what it has attracted in the past.


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Monday, July 09, 2012

Painful but cathartic verdict

By terminating all 122 licences issued by former telecom Minister A. Raja, the Supreme Court has shown its utter disgust and contempt for policies that smack of bias and are rigged to serve partisan interests. Will the government now come up with a transparent policy for allocating licences?

Much muck and dust has been flying around ever since the 2G scandal prised open yet another egregious instance of the unholy nexus between our crooked politicans, complicit bureaucrats and compromised businessmen. The landmark Supreme Court judgement early this month, cancelling all 122 2G licences issued by former telecom minister A Raja, brings to an end the kerfuffle that had been reverberating in the nation’s corridors of power and business. The SC verdict marks the opening of a new chapter in an otherwise so far sordid saga that has dogged India’s telecom sector in recent years. Immediately, following the verdict, telecom minister Kapil Sibal announced at a hurriedly called press conference that his government welcomed the SC ruling, which would help “remove the uncertainties clouding the telecom sector.”

Meanwhile, in the aftermath of the apex court ruling, several telecom operations seem to be in a state of funk. Many of them snapped up licences thinking they were buying into India’s telecom success story. But the SC ruling, some people say, seems to have thrown out the baby with the bath water. Copping the blame on the telecom players for obtaining a licence given out by the government on the basis of a policy that the Supreme Court has now repudiated seems a tad rich. Unfortunately, in light of the cancellation of telecom licences, these operators now look like having become dupes of the con played out by Raja and his underlings. The court’s ruling also comes as a stinging excoriation of the UPA government which, despite being alerted by various quarters to the flimflam orchestrated and pulled off by Raja and his minions, chose to string along with the first-come-first-serve policy for granting 2G licences.

Some players are certain to bear the brunt of the SC judgement more than the others. Already, Bahrain Telecommunications Co (Batelco) has announced that it is pulling out of its joint venture with STel and exiting India. The C. Sivasankaran-owned STel was among the beneficiaries of Raja’s 2G spectrum allocation. United Arab Emirates operator Etisalat, Norway’s Telenor and Russian company Sistema are the other foreign firms affected most as they had bought shares in the Indian companies whose licences have been scrapped. The court has given these companies four months’ time to shut shop. With the cancellation of all its 22 licences, Uninor (Telenor’s JV with Unitech) is the worst affected by the judgement. Though the company has one of the lowest average revenue per user of Rs 98, Uninor has the highest number of subscribers (36 million) amongst the greenfield operators. It has a workforce of around 17,500 and is operational in 13 circles. Uninor has also made substantial investments of around Rs.140 billion in the market.

Not everybody stands to lose though. Older incumbents such as Airtel, Vodafone and Idea stand to gain a lot since they are the ones who have been in operation well before 2008 when Raja gave out the new 2G licences. Idea has not done too well in the new circles it had won and hence its loss of nine circles does not amount to much. These players will most likely bid for maximum circles when fresh auctions are held so as to expand their reach further. “The court has said the government must now get the market value of these licences,” said a visibly elated Subramanyam Swamy, who was one of the parties that challenged the 2G licence allocations in the court.

While the angst of players adversely affected by the judgement is understandable, the SC has, in one deft stroke, dispelled the fog and murkiness surrounding Raja’s 2G licence allocations. The court’s verdict has ensured that the law of the land prevails. It has sent out a strong message to both the industry and government that crony capitalism will not be tolerated and that corrupt business deals facilitated by a collusive government will be subjected to judicial scrutiny. Says Member of Parliament Rajeev Chandrashekhar, “This is the first time that there has been such a detailed judicial scrutiny of the licence issuing process. This judgment signals that the sector is finally open to only those investors and stakeholders who wish to invest, build and succeed by following the laid down rules and laws.” He adds that the judgement clarifies many policy confusions and also lays down the mammoth task of cleaning up and reorganising the sector over the next year or so. “This scrutiny and the judgement establishes the unambiguous basis for licence grants through auctions or market-based mechanism by the government today and in the future.”

In order to prepare the ground for a fresh round of 2G spectrum auction, the Telecom Regulatory Authority of India (TRAI) has come out with a pre-consultation paper. The regulator has also sought to allay fears of existing subscribers in circles where telecom licences of operators have been cancelled. According to TRAI, subscribers need not fear about their connections as they can port to other service providers in their respective circles. While the modalities for holding the auction are being worked out, the government expects the auction to fetch a revenue of about Rs 750 billion. However, following the cancellation of licences there is likely to be an overabundance of spectrum in the Indian market, which will ensure that prices remain low. Besides, incumbent operators have already paid through their noses for 3G and Broadband Wireless Access (BWA). These investments will take a long time to turn profitable. In such a scenario, it seems doubtful whether these service providers will warm up to participating in another round of auction. Moreover, the incumbents (whose licences have not been cancelled) have enough 3G spectrum which can be used to accommodate new subscribers. Says Rajan Mathews, Director General of the Cellular Operators Association of India (COAI), “I don’t think that kind of money is available with domestic players. That is why the government itself indicated that it will raise the FDI limit to 74%.” Just to ensure that his reasoning comes across more convincing, Mathews draws your attention to 12th Five Year Plan proposals for the telecom sector. “The preliminary numbers put out by the Planning Commission suggest Rs 6,500 billion as the outlay for rolling out various initiatives by government. They themselves admit that 80% of that would have to come from international sources.”



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