Prime Minister Manmohan Singh appears to be on steroids. Just a few days after his government took the decision to decontrol petrol prices and make a start on diesel prices, he announced that an Empowered Group of Ministers (EGoM), and not Communications Minister A Raja, would take a call on the latest recommendations of the Telecom Regulatory Authority of India (Trai).
The Trai recommendations, if accepted, will deal a huge blow to the top telecom players — which is why, in a completely unprecedented move, business leaders like Bharti Airtel’s Sunil Mittal and Vodafone Global Chief Vittorio Collao (and even BSNL Chief Kuldeep Goyal) have publicly expressed their concern over what’s happening (see Raja’s in the saddle again, May 17, for the details of Trai’s proposals). In the past, most such concerns were expressed through industry bodies — to the extent the Mittals spoke of them, it was done privately. To do so publicly is a sign that the industry is seriously worried.
Much can be said on both sides of the Trai recommendation asking the older telcos like Bharti,Vodafone, BSNL and MTNL to pay for the “extra” spectrum they have over 6.2 MHz. Similarly, it is open to debate as to whether this payment should be linked to the price of the 3G auctions since the sky-high bids were a direct result of the spectrum scarcity caused by Mr Raja when he decided to give fresh licences in 2008 in 122 telecom circles. But the real issue here is a simple one: if the government is willing to charge Bharti/ Vodafone/ Idea/ BSNL/ MTNL the 3G market price for the “extra” 2G spectrum they have been getting since 2002, why shouldn’t the same principle of market-pricing be applied to spectrum which was handed out as late as in 2008? After all, the “extra” spectrum given to the Bhartis and the BSNLs was also given out on the basis of the then policy of linking spectrum to the subscriber base — if that policy is to be now reversed, then why can’t the licensees of 2008 like Uninor be asked to pay the same 3G market price?
This is where the entire EGoM process runs into a wall. To take decisions on whether 2G spectrum in the 900 MHz frequency band should be priced, as Trai says it should, at 1.5 times of the 3G price, whether the same 2G spectrum in the 1800 MHz band should be priced at 1.3 times if the telco has more than 8MHz of it… all of this requires a kind of technical expertise that an EGoM simply doesn’t have. In the normal course, this is something the telecom ministry’s babus would examine. The logical thing then is to get these same babus to do the exercise and make a recommendation to the EGoM. But if the goal is to reduce dependence on the telecom ministry, that’s not such a great idea!
(In the case of Delhi and Mumbai airports, when it was alleged by Gajendra Haldea in the Planning Commission that the marking for airport bids was unfair, a GoM was set up but it wasn’t able to resolve issues though they were a lot less technical and complex than the ones at hand in telecom; finally the matter was handed over to the cabinet secretary who, in turn, entrusted the somewhat technical task to Delhi Metro Chief E Sreedharan — Sreedharan virtually endorsed Haldea’s reports. It would be interesting to see if the telecom EGoM finally chooses to go the same way.)
What makes the EGoM process a lot more complicated, of course, is that any decision it takes is going to be contentious. If it decides to go with Sunil Mittal and says Bharti/ Vodafone/ Idea/ BSNL/ MTNL need not pay for the “extra” spectrum they have beyond 6.2 MHz, you’re going to get firms like Reliance Communications that will protest, arguing that the older telcos did not pay an entry fee while getting their “extra” spectrum. They will argue that the 2002 auction under which these firms got their licences allowed them to get only 6.2 MHz, anything more than that was illegal. If, however, the EGoM says they have to pay, then Bharti et al will go to court arguing that they got the “extra” spectrum as a part of government policy.
Eventually, as in 1999, when the government moved from a fixed licence fee model to a revenue-share one, the only possible solution is likely to be a compromise with all sides sitting down and then agreeing that there will be no court cases once the settlement is hammered out — no single telco is going to get everything it wants and the sooner it accepts this, the better for the industry. This will probably mean some of those that have got undue concessions in 2008 will get to keep them, but it’s only a perennial optimist who believes that a concession once given can be taken away.
PS: Older players like Sunil Mittal made a big mistake in 2007 when they refused to even entertain the possibility that they should pay for the “extra” spectrum since this is the justification made for giving out the 2008 licences at bargain-basement prices. Indeed, had they agreed, they would have paid for the “extra” spectrum on the basis of prices discovered in the 2001 2G auction — now they are being asked to pay at the vastly-higher 3G auction prices! The question is whether they’ll repeat the same mistake twice over. The alternative is lengthy and costly litigation.