Even Prime Minister Manmohan Singh’s well-wishers are convinced that his Achilles’ heel will be the DMK and its ministers like Raja — most of the allegations of favouritism in the UPA’s last tenure pertained to Raja’s ministry. Given the PM’s powerlessness, he caved in quickly after his initial refusal to give telecom to Raja, most are convinced Raja-II will bring more shame to the government. Here’s a prediction: after a few months, the same industry leaders who went to court against Raja-I will be singing his praises, talking of how pragmatic he is, how visionary, and so on.
This will have less to do with the minister’s style of functioning than it does with the chips he holds. Raja-I gave away scarce spectrum to a handful of favoured firms at a fraction of the market price instead of auctioning this to the highest bidder — this lost the government about $10bn, but caused a lot more damage. He gave the spectrum-cum-licences to firms who, by and large, didn’t have a hope in hell of being able to utilise it since they didn’t have the couple of billion dollars required for a half-decent network and, in any case, they couldn’t possibly compete with the huge scale advantages that companies like Bharti Airtel have. So while the favoured few can’t utilise their spectrum, firms like Bharti Airtel and Vodafone are starved of spectrum.
Logically, firms like Bharti/Vodafone should have bought out the favoured few and got their spectrum for a huge premium. But in order to prove he’d given out the licences only to be able to get more competition in, Raja put in place M&A norms which prevented a sale for at least three years. Raja-II will now change the M&A norms. This will allow Bharti/Vodafone to buy, for the sake of argument, Swan/Loop Telecom — Bharti/Vodafone will get their spectrum, Swan/Loop their return on investment, and everyone will be happy. Bharti/Vodafone would have had to pay money anyway, the only difference is that instead of paying the money to the government in an auction, they will pay it to Swan/Loop. (And who cares about the exchequer — even the BJP which has been so obsessed with corruption right from the time of Bofors, didn’t think this was worth getting agitated about.)
How Raja-II will do this is also interesting. He will probably make use of the wholly gratuitous line in a recent TDSAT judgement (the one that absolved Raja-I of the charges against him) saying the government needed to rework the M&A norms keeping in mind the industry’s need for spectrum. Since the man who wrote this judgement, JS Sarma, has been appointed the head of the Telecom Regulatory Authority of India, Raja-II can safely make a reference asking for the TRAI’s views on the matter!
If Raja-II allows the 3G auction to happen before this, this will reduce some of Bharti/Vodafone’s desperation for Swan/Loop’s spectrum. This will then lower the price Bharti/Vodafone will have to pay to Swan/Loop; it will make the older GSM mobile phone firms sing Raja-II’s praise louder — both sets of firms will compete to grab the minister’s mind.Watch this space.
The other big action area is the new spectrum report prepared by Raja-I’s ministry while he was in charge. The report suggests that all future spectrum be auctioned, that existing firms like Bharti/Vodafone who’ve got ‘extra’ spectrum (beyond the 6.2MHz guaranteed in their licence) be asked to pay for it. Raja-II now has to decide whether to accept the report and, if he does, whether to implement all of its recommendations and, if so, by when. If he decides that the ‘extra’ spectrum is a fait accompli and needn’t be paid for, he’ll be praised by the older mobile phone players. If he decides his favoured few will get free additional spectrum from the 4.4 MHz they have to 6.2 MHz, and it is only after this that the auction principle will come into force, this will win him praise from them. That is, there’s a lot of opportunity for both lots of firms to praise Raja.
When there are 10 million new mobile phone subscriptions to be had each month, few are going to spend too much time criticising Raja — the reason why it happened to Raja-I was that he blocked the older players’ ability to get spectrum. Live and let live.
Raja ki aayegi baraat/Rangeeli hogi raat/Magan mein naachoongee — and unlike Nargis in Aah, no one’s going to be crying. Or maybe the exchequer will shed a tear or two. Maybe.
