Tough call

Trai tries to restore balance, mop up revenue

The Telecom Regulatory Authority of India (Trai) has stepped in to restore balance to the sharing of the humungous revenue stream flowing from the private marketing of public spectrum, nudging telecom companies to widen their network and tap new customers. The phenomenal growth of value-added services over and above voice telephony has opened the government’s eyes to the untapped revenue potential in this vital infrastructure sector. Equally, having witnessed the decline of the public sector, for which the government has no one else but itself to blame, there is now an attempt to get private companies to discharge their social obligations. Trai has made some excellent recommendations while dealing with the benefits that those firms which got licences/spectrum at bargain-basement prices in 2008 stand to make when they sell/transfer these. Two of these firms, Unitech and Swan, have already made a killing but, in future, Trai has said, all those who sell their firms will have to pay the government a price that is based on the current 3G auctions — those who choose not to sell don’t have to make any additional payments. So, if an older firm with 6.2 MHz of spectrum buys one of the 2008 licensees which has got 4.4 MHz of spectrum, the two firms will have a total of 10.6 MHz — Trai says that while 6.2 MHz can be retained without an extra payment, the remaining 4.4 MHz has to be paid for. Based on the current 3G bids, this will be around Rs 13,200 crore. In other words, the 2008 licensees can no longer hope to make a killing out of selling their licences. The idea of having a uniform licence fee instead of multiple ones for different services right now is also a good one, since it is the arbitrage that this allowed that resulted in some firms misdeclaring their revenues in the past — one way was to, for instance, state that more revenues came from internet services than was actually the case, since such services attracted a zero licence fee.

It is, however, not clear why Trai has recommended that the government give another 1.8 MHz of spectrum free to those it gave 4.4 MHz of spectrum with a 2G licence in 2008 for a mere Rs 1,651 crore (if 3G auctions close at Rs 15,000 crore for 5 MHz of spectrum, this would make it clear the price for the 2G licence should have been at least eight times as much). Trai’s explanation is that the government had given 6.2 MHz to the earlier lot of players (they now have to pay around Rs 11,000 crore for the spectrum they have beyond this) and so it had to give the same amount to the 2008 lot. Perhaps Trai should explain its case better given the doubts that have been raised. The 2008 licences were fraught with all manner of legal infirmities, which included arbitrary cut-off dates, creation of special categories of licensees, such as “dual technology” ones, likely leaking of dates when the application windows would be opened, and so on — which is why they are the subject of a CBI investigation and a CAG audit. So, equating such licences, sold at around an eighth of the market rate, with those sold at market rates is surprising and requires further clarification. Trai’s view that private telecom players have not done enough to develop the full public potential of the spectrum at their disposal is well taken. However, the needs of the rural consumer will get addressed with time, with the growth of rural income.