Though marketed as a bold new reform measure from a government just liberated from the shackles of the Left, last week’s 3G spectrum policy is a sad amalgam of bad and anti-competitive policy, huge rollbacks and even larger holes. In the event, the policy has enough ambiguities to ensure telecom firms keep going back to the government to seek clarifications and relaxations. Given how Telecom Minister A Raja played ducks and drakes with the policy on allocation of 2G spectrum (the current band of spectrum which is used to provide the normal mobile services that you and I use) to ensure favoured firms got spectrum at bargain-basement prices, perhaps that was the general idea.
The decision to charge an additional Rs 1,651 crore as entry fee (apart from what they bid for the 3G spectrum) from new players who don’t have 2G mobile licences (also known as Unified Access Service Licences, or UASL) clearly falls in the list of anti-competitive policies — a new player has to anyway struggle harder since the best customers are taken and is now burdened with this additional cost. Ironically, six months ago, the same Mr Raja used the exact opposite logic while allocating 2G spectrum. In 2001, the auction for 2G spectrum resulted in a price of Rs 1,651 crore for an all-India licence. Though this price was discovered seven years ago when just 4 million persons had mobile phones (today, eight million new customers come in each month), Mr Raja refused to hike the price citing the telecom regulator’s specious argument of a level playing field — that if, in 2008, a new player paid more than what the older ones paid in 2001, the playing field wouldn’t be level! Well, he’s now consciously unlevelling the field to disadvantage the newcomer.
If it wasn’t bad enough that Mr Raja favoured Reliance Communications by giving it 2G spectrum ahead of the others a few months ago even though it hadn’t applied for spectrum, there’s a Reliance clause this time around as well. After saying spectrum will be auctioned in a separate band for the CDMA-mobile players (Reliance Communication and Tata offer CDMA-mobile while Airtel and Vodafone offer GSM-mobile), the policy offers them another option. These firms, the policy says, may instead ask the government to just allot them the spectrum — and pay on the basis of the bids made by the GSM lot for their 3G spectrum. While that’s fair enough, the “seniority for allotment shall be the subscriber base” — that is, Reliance Communications, which has the larger number of subscribers, will get the spectrum first.
Even more amazing is the fact that the government is planning to go ahead with the auction without even having the spectrum in place — the policy says between 5 and 10 slots will be offered “subject to availability in different telecom service areas”. Five or 10? Clearly the bids will be vastly higher if they’re five slots. So which will it be? The policy says the actual number will be announced well in advance of the auction, but the government’s track record in allotting promised spectrum is so poor that no one is going to believe it. Vodafone, Idea and Aircel paid for spectrum in December 2006, but got it only in 2008; less than a third of those who paid for their spectrum in January this year have got it so far; in 2001, when Reliance’s illegal mobile services were legalised, the telecom regulator said there was enough spectrum for everyone; a few years later, the same regulator said 3G spectrum should be provided free since there was a shortage of 2G spectrum! Given that 3G policy has been yo-yoing for so many years, you’d think the government would have already secured the spectrum.
And while there is no clarity on the number of 3G slots which will be available, one slot has been reserved for BSNL/MTNL — indeed, they may already have been given the spectrum. Apart from the fact that this is unfair to the other future 3G operators, the price at which this will be given has not been fixed — MTNL/BSNL are to pay the price equal to the highest bid by private players. So, the boards of these two PSUs are going to clear several billion dollars of equipment purchase for a project whose ultimate cost they don’t have a clue about! Such is the contempt for the managements of PSUs that the government doesn’t even want to give them a chance to examine the business case for bidding for 3G licences.
The M&A policy is equally curious. Last week’s 3G guidelines say the policy will the same as the April 2008 one. What does that say? It says the new lot of existing 2G players can’t merge for three years but they can be acquired by a firm which has no operations in India. So let’s say Deutsche Telecom or NTT come in and win the 3G bid and, in addition, pay the government Rs 1,651 crore — they then gets a 3G licence as well as a 2G UASL one, but without 2G spectrum. But to run a proper network, Deutsche and NTT need a 2G network as well. So, they’ll have to merge/takeover a new 2G player, say Unitech. But the April 2008 guidelines say new players can’t merge and by virtue of getting the 2G/UASL licence, both NTT and Deutsche are “existing” players!
In other words, once again, all roads lead to Mr Raja.
