Sunil Jain: Manmohan is not the Raja, I am

RATIONAL EXPECTATIONS

Not too many should have been surprised by the roadside brawl outside the telecom ministry when the ministry announced, at 2.45 on Thursday afternoon, that those wanting telecom licences would have between 3.30 and 4.30 to deposit their cheques. For, this is precisely the way in which telecom policy has been conducted in the country. In this case, at least there was some notice; when it decided to favour Reliance Communication by creating a separate category of applicants called "crossover technology", the telecom ministry issued a letter of intent to Reliance on October 18, allowed it to pay the money on the morning of October 19, and then announced its policy! And before this, while Telecom Minister A Raja gave companies a week in which to submit their applications for mobile phone licences/spectrum on September 25, he used this as a cut off for considering applications "" those that applied before September 25 would be considered first!

At the end of the day, the lesson is that might alone matters. In this case, those who were close to Raja did well "" they got licences worth Rs 6,000-8,000 crore for a bargain-basement Rs 1,651 crore each. Others that refused to cow down got the boot "" Airtel and Vodafone-Essar find themselves squeezed of spectrum and have no visible path to service an increasing customer base. In the process, Prime Minister Manmohan Singh got exposed as completely powerless, and willing to do anything to remain in power "" of course, given how he'd already given up on his biggest achievement, the nuclear deal, to save the government, expecting him to act was pretty unrealistic to begin with.

Indeed, while the Telecom Regulatory Authority of India (Trai), the so-called independent regulator, was willing to play ball with the ministry, Raja found even its recommendations onerous. In April, Trai was asked if CDMA-mobile firms (like Reliance) could be allotted GSM-spectrum. Trai, on August 28, 2007, said it could. What of the priority "" would firms who'd applied earlier get licences before Reliance? What of the price "" the Rs 1,651 crore price was discovered in 2001 and the cabinet decided in 2003 that all future licences would be auctioned.

Trai, to its discredit, left everything to the government. So, the government created a brand new category of crossover spectrum in which it gave Reliance Communications a letter of intent "" brazenly, though Reliance was given the licence on October 18, it will get GSM spectrum before those who applied even as far back as June 2006! Since none of those affected is appealing, however, the ministry will probably get away with this. Trai, however, also realised that "crossover" firms like Reliance would be running two mobile phone services and so would be in a better position than the existing GSM-mobile phone firms. So, it said crossover firms would effectively have to pay higher annual spectrum usage charges "" Raja, however, decided to ignore this. Under the law, though, the government cannot unilaterally reject Trai recommendations "" they have to be sent back to Trai for reconsideration if the ministry differs, but then when the PM can't stop you, why will Trai?

While giving Reliance a brand new licence for a cut-throat price was incorrect, would it have ensured it succeeded? Probably not, given how well Bharti Airtel and Vodafone-Essar have done. So, Trai jacked up the subscriber norms by 2-3 times to ensure existing firms got no more spectrum, and there's always the possibility that when the firms qualify under these norms, the norms can be hiked again! (I believe the cellular players left themselves open to such pressure when they plumped for subscriber-linked criterion instead of supporting an open auction, but that's another story.)

This, of course, is not the end of the story. Many of the new entrants don't have the $5-6 bn required to roll out a full-fledged mobile network and have really bought the licence to resell. Under the Trai recommendations, however, they cannot sell until they've built up a certain minimum network across the country. This is what Raja's next step will be. He'll ignore this part of the recommendation or accept another Trai recommendation on "active infrastructure sharing", which allows these firms to use some other firm's infrastructure in return for a fee "" that way, they'll have "rolled out" their network. Apart from helping those who've got bargain-basement licences to profit from selling them, this is also something that could allow Airtel and Vodafone to survive "" by buying these licences! That's what you could call a win-win situation. The only loser is the exchequer, which could have got Rs 20,000-30,000 crore extra. And, of course, the PM and the country's reputation. But who cares about them?