Tata Teleservices Ltd, which offers both GSM and CDMA-based mobile telephone services, has supported the Telecom Regulatory Authority of India’s proposal on refarming of the 900MHz spectrum held by GSM operators, while saying the high reserve price suggested would scare away the competition and might not give the best value of spectrum. N Srinath, managing director, tells Mansi Taneja & Surajeet Dasgupta there’d be an increase of 11p per minute in rates if Trai’s proposals were accepted. Edited excerpts:
How do you see telecom sector going forward? Is there still room for growth?
This has been an important sector for India; it is a success story. A lot of it has been driven by positive interventions by the government. Mobile prices have fallen to a point where we have the lowest rates in the world. The industry is still young; there is still a lot of opportunity for industry to grow. Rural teledensity is an area which we can clearly improve upon. We are at a threshold where if we take right actions from a policy perspective, then it is possible for the industry to grow significantly. Introduction of competition has brought in a couple of things — rates have fallen and it has brought people into the ambit of telecom who otherwise would potentially have not got access. Between March 2008 and March 2010, the number of operators increased substantially from five-six to 10-12 but the revenue per minute has fallen from some 70p/minute in 2008 to 35-45p/minute now. The number of subscribers has also more than doubled in this period.
What is your view on Trai’s recommendations for auction of spectrum? Do you think the reserve price has been set too high?
We welcome Trai’s recommendations for going through an auction and to use a market-discovered mechanism. However, there are some questions on how the value of spectrum has been derived. The core issues we need to address are a level playing field and refarming of spectrum in the 800 MHz and 900 MHz band. The government should take back that spectrum immediately and redistribute across all operators. Operators having excess spectrum beyond the contractual limit should be made to pay for it and new operators should get a chance to acquire it. The current reserve price is not supported by the business cases; operators will struggle to absorb the cost. Therefore, will have no choice but to pass on some of the cost to the consumers. Deferred payment as suggested by Trai is a positive thing but there is no reason for the reserve price to be high as we saw from the 3G auction process. This will scare away competition and not necessarily give you the best prices for value of spectrum.
Spectrum has been liberalised by Trai but there is a little risk in that argument -- it is banking on revenue streams from services yet to be launched and we do not know what kind of customer uptake it will be. We have not seen that kind of uptake for 3G, which we expected after paying so much for spectrum. There is a cap on the customer’s ability to pay in this market. It will be an inordinate amount of risk on operators. There has to be a healthy balance among all — the government’s need for revenue, for allocating a national resource, keeping consumers’ prices at lower levels and sustainability of the operators.
What kind of impact do you see on the rates because of Trai’s proposals? Will you bid for the upcoming auction at this price point?
Based on our current subscriber base and minutes of usage, there will be an impact of 11p per minute. Staggered payment as suggested by Trai will manage my cash flow, but for an accounting perspective, we will have to recognise the whole value upfront. It is too early to say whether we will bid or not. We will wait to see what will be the final policy. Our choice will be by circle to circle; whether it will be spectrum or capex, we will decide.
How has been the uptake of 3G mobile services?
There has been some takeoff in 3G services but there are issues. First, the penetration of smartphones is not there. We need to have more devices at sensible prices.
Consumers are not seeing an incremental benefit over 2G in paying for a 3G plan.It will happen over a period of time when there will be more applications, content, etc.
What are the current issues impacting the sector or you as a CDMA player?
The main issue is a level playing field. CDMA operators have had a very tough time. We started as a CDMA operator initially; there is around 20 MHz available in 800 MHz, out of which 17-18Mhz is available for commercial use for operators. When it comes to spectrum allocation, CDMA operators are given less spectrum for the same number of subscribers as compared to GSM operators because CDMA potentially is much more efficient. We did not have any alternate band. So, there was no headroom for growth. We had no choice but to move to GSM-based services, so we could get more spectrum. And, even here, we’ve been been given far less spectrum than the incumbents. We still don’t have GSM spectrum in Delhi, since 2008.
Structurally, imbalances in the industry have continued and these have largely been around how spectrum has been distributed among different operators. The consequence is that we do not have a level playing field.