It's possible to conduct auction in less than 400 days: R Chandrashekhar

Interview with Secretary, Department of Telecommunications

The Telecom Regulatory Authority of India (Trai)’s recommendations on auction of spectrum led to the industry sulking over the high reserve price. However, new players saw a ray of hope, as the Supreme Court extended the time for cancellation of licences to September 7. R Chandrashekhar, secretary, Department of Telecommunications (DoT), in an interview with Mansi Taneja, talks about the possibility of conducting auctions in less than 400 days and the need to read Trai’s recommendations in a holistic manner. Edited excerpts:

The Supreme Court (SC) today extended the time for cancelling licences for telecom companies from June 2 to September 7. It has also asked the government to conduct the auction by August 31. Do you think the government would be able to stick to the timeline set by the SC?
I have not seen the SC order yet. What exactly it has said is important, as there was no mention of a timeline for the auction in the earlier SC order. We have already filed a full schedule for the auction in 400 days in the SC, based on past experience. While waiting for Trai’s recommendations, we have working on whatever preparatory action could be taken. We have been doing everything possible to compress the timeframe and we continue to do that. The steps that have been indicated are necessary, and it may be difficult to eliminate any step involved in the auction process. But if there is any direction by the SC, we will do our best.

Of course, it is possible to conduct auctions in less than 400 days. It was the best estimate. However, even then, there are uncertainties, as nobody knows how much time the actual auction would take, as it would be a simultaneous, multiple-round auction. We will certainly inform the SC about the actions we would take.

Telecom players have expressed concern over the high reserve price Trai has recommended for the auction. Do you think this would impact the industry, which is already reeling under high debt and stiff competition?
It is early to comment on a final view, as we received Trai’s recommendations only yesterday. But, prima facie, there is overemphasis on just one number, the reserve price.

We must put things in a proper prospective. At the end of the day, several aspects of the report have to be looked at comprehensively and holistically. First, Trai has recommended liberalisation of spectrum, which would be a game changer. This spectrum can be used with any technology and offer any service, and can be done over a 20-year period. Technology has changed so much over the last 20 years. Imagine how much it would change in the coming 20 years. Technological changes have brought in more efficiency, greater revenue earning potential and a wider range of services.

Second, spectrum usage charges, which currently stand at three-eight per cent, have been reduced to one per cent. This is a huge difference. We have to look at the impact year over a 20-year period. Third, on the cash flow for operators, the payment terms have been substantially moderated compared to 3G, in which the entire amount had to be paid upfront. Operators would have to pay just 25-33 per cent, with a two-year moratorium, with the remaining in equal installments in 10 years. If we look at all these factors, the picture would give us a balanced view.

But won’t it ultimately impact consumers with an increase in mobile rates? There has been uncertainty for companies, as well as consumers, since the SC’s order for cancellations in February.
When you net all the factors together, what is the total percentage of operational cost that this accounts to—the spectrum cost? As long as it is only single digit percentage points, the overall impact on rates should not be significant.

Uncertainty is beneficial to no one, neither the government, nor the operators or consumers. We are aware of this, and we have been hastening all our processes.

How soon would you be able to take a final decision on Trai’s proposals?
As indicated earlier, we will try to send our response to Trai by May 2. Trai would then send its final comments. It was based on the assumption that Trai would give its views by April 3, but it came after a delay of 21 days. Still, we will still try to adhere to the May 2 deadline. We are working on all issues in parallel to minimise the time as much as possible. Once we receive Trai’s final views, we will analyse these and take these to the Telecom Commission. Them we will refer these to the empowered group of ministers (eGoM) for the final decision, which should happen within a month after Trai states its final views.

Has the government set up a new eGoM for the auction issue?
It is the existing eGoM under Finance Minister Pranab Mukherjee, set up for vacation of spectrum. Its terms of reference and scope have been extended to cover the auction and allocation of licences. There have been minor changes in its composition. On Monday, we had notified the eGoM to take all necessary decisions for the auction and allocation of licences.