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Why is the auction of the 122 cancelled licences taking so long?

We have squandered 12 weeks, and seem to be all over the place in implementing a requirement which is less complicated than is being made out to be

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Much as I resolutely hold the order of February 2, 2012 to be a less than ideal culmination to an otherwise thorough exercise, it beats me why it is being claimed that it will take a minimum of 400 days to implement the Supreme Court directive. If the Supreme Court Order were to be approached with speed and sincerity, it could have been attempted within the original time table of June 2, and certainly must be accomplished within the revised deadline of August 31.

After all, what is the big broad thrust of the Supreme Court? Let us examine it through the prism of, say Andhra Pradesh Circle, where a total of six new licences were cancelled. First, says the Supreme Court, it was wrong and arbitrary to retrospectively fix a cut-off date of September 25, 2007 and thus to artificially choke the number of applications. Second, the Supreme Court faults the rather imaginative interpretation of first come, first served, which effectively and perversely became first serve, first come. So, the Supreme Court cancelled that entire process, and directed that the exercise be repeated, this time through an auction. That is all!

So what the government has to do is to recreate and mimic the conditions of January 2008 to the extent possible for an auction. In the case of Andhra Pradesh, it must put exactly six new licences on the block, not one licence more, not one licence less. It must then open the auction of these six new licences to every eligible bidder in the world, the six corporates whose licences stand cancelled included. Equity and economic logic would dictate that the reserve price should be the price actually paid in 2008 plus notional interest for the intervening years .

The auction design and method should be identical to the supervised and access auction of 2010. The winning price would be determined by the price at which only six bidders survive, and the seventh has failed to match the last escalated bid price. If any of the cancelled licence holders qualify, then they get to top up with balance payment, take a new licence, and stay in business. If, on the other hand, they fail to make the cut, then they pack up and the spectrum attached to their cancelled licence transfers to the winning bidder. In such an event, it is logical that the losing bidder gets the original payment back, provided of course they had at least bid the reserve price.

This is the obvious treatment of the Supreme Court Order. This is the only logical treatment. In fact, no other treatment would be faithful to the Supreme Court Order. It was for the Telecom Regulatory Authority of India and the Department of Telecommunications and the finance ministry to have thrashed this out within themselves with details during February, and perhaps even socialised it with the Supreme Court and obtained their understanding to move ahead. Subsequent administrative steps should have been triggered within March. Instead, we have squandered 12 weeks, and seem to be all over the place in implementing a requirement which is less complicated than is being made out to be. There is too much at stake, and the world is watching!


 

The author is a commentator and a former telecom CEO

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