Can TRAI bring back the smiles to telecom?

The new spectrum prices proposed by the telecom regulator challenges the Comptroller and Auditor General (CAG)'s methods to calculate the government's potential revenue loss of Rs.1.76 lakh crore and can bring back the lustre to an industry that has been in the dumps since 2008, say analysts.

"The estimate of losses based on presumptions has, in some measure, contributed to the pernicious atmosphere leading to the decision standstill," the Telecom Regulatory Authority of India (TRAI), referring to the CAG report, said Monday.

"I think several factors including actual mischief by bureaucrats, politicians and players besides wild estimates of losses by the CAG are to blame for tarnishing the image of the sector. We cannot change that it, overnight. However, the TRAI's approach to the reserve price for spectrum auction will promote rational analysis as well as transparency," Mahesh Uppal, director of telecom consultancy firm Com First, told IANS.

As many as 122 telecom licences were ordered cancelled by the Supreme Court, finding that the process followed in 2008 was faulty. Among them Uninor had 22 licences, Loop 21, MTS 21, Videocon 21, Etisalat 15, Idea 13, S-Tel 6 and Docomo 3.

"The CAG report has definitely hurt the industry. Generically more decisions were pending at the government level. For the last three years we have not seen much activity in the government level. With the general elections round the corner, I just hope the government is not doing just lip service," Rothin Bhattacharya, executive vice president, strategy, HCL Infosystem, told IANS.

The regulator in its recent recommendation has slashed floor price of spectrum substantially to attract better participation from bidders in the next auction.

"This will also help the government to meet the fiscal deficit by making sure that more bidders turn up and the entire spectrum available for auction is sold. That is the reason it has lowered the prices drastically this year to lure more operators to participate in the bidding process. It is an encouraging step," Rishi Tejpal, principal research analyst with Gartner told IANS.

"The operators will view it as quite encouraging. The government will try to ensure participation from each operator," he added.

The last two - November 2012 and March 2013 - auctioning of spectrum could not find any buyer due to high spectrum prices.

The fact that the base price has been reduced by 60-80 percent, it will boost the image of the industry in the eyes of the foreign investors as well. That would attract more FDI and FII into this sector, Tejpal said.

Terming the recent recommendations as an attempt to bring back rationality and analysis, Uppal said the benefit of the recommendations cannot translate into benefit of the average person now.

"It cannot translate into immediate benefit for the average person. It signals a rational and coherent approach which will go some way towards creating a more stable regulatory environment, which is a pre-requisite for growth. This is good for players as well as users," he said.

Jaideep Ghosh, Partner, KPMG, said industry-friendly regulations were needed to bring the industry back on the growth path.

"The industry has recently got 100 percent foreign direct investment approval, which will attract more foreign institutional investors and other foreign investment in the country. It is very important that it has a positive impression in the eyes of the market abroad," he said.