Restating numbers

It is easy to be sympathetic to the arguments made by telecom firms which have stated that they cannot possibly be asked to physically verify the addresses of all their subscribers (the Tata telecom firm, however, is in a minority and is in favour of full verification). Apart from the huge costs they incur on verifying subscribers who make a very limited number of calls, there is the whole issue of volumes, given the industry's claim that it is adding five million customers a month. In any case, surely a telecom service provider's job is to provide efficient telephony, not checking if a subscriber actually lives at the address he or she claims to be living in. But what is happening on the ground today, as this newspaper reported the other day, goes far beyond this. It is one thing for a telecom company to issue a pre-paid card to a customer based on a fake identity proof, but quite another to not even ask for any document that establishes the customer's identity, or to even, as has been discovered, supply multiple phones based on the same identity proof. While telecom firms have to verify the addresses of 72 million subscribers (that's the backlog and there's another 5 million fresh ones each month), they've done this for just 13.5 million so far and found the papers for 4.8 million customers were not in order. These have since been deactivated. Mind you, this is not a physical verification. The companies are only checking if the documents have been submitted. With a long way to go, it's anybody's guess as to how large the problem could be""some months ago, a report done for the CII had opined that the problem would be very severe.

Undoubtedly, the outcome of this verification exercise will have serious implications for the valuations the industry has got so far. After all, if a buyer is paying anywhere up to $1,000 for each subscriber that a firm has, the genuineness of the subscriber list is clearly of some importance. From the public policy point of view, which cannot be too concerned if a private buyer paid too much for another firm, other issues are important. For one, the spectrum that is being given to firms to be able to carry their telecom signals has been linked to the subscriber base. There are subscriber milestones which, once achieved, automatically ensure that the firm gets more spectrum. Given what has just happened, this policy appears to have been abused. It is also not clear as to what happens now. If companies are disconnecting subscribers, are they going to surrender the spectrum already secured for these subscribers? Now that the government is in the process of finalising its policy for allotting 3G spectrum, it becomes even more important that it be auctioned instead of being allocated on the basis of parameters that lend themselves to manipulation. In any case, the idea always has to be to increase the number of players, not to restrict the telecom business to the first few in the race.