Calling the future

UPA-II must look forward, not back, on telecom

The Supreme Court judgment cancelling 122 2G licences plunged the telecom industry into crisis. It is now incumbent on the government to utilise that crisis as an opportunity for reform. It must act sensibly, transparently and with due speed to restore institutional credibility to a sector suffering from a severe deficit on that front. While the release of the new telecom policy was a step forward, recent reports that the government has consulted its lawyers on the legality of licences issued prior to 2008 are worrying. This is not the time to play politics or shirk responsibility. After all, a post-judgment road map exists: delink spectrum from licences. Charge a relatively nominal amount for licences, (while imposing technical qualification norms). Auction off spectrum, allowing the market to price this resource.

 

True, there are many questions that need satisfactory answers. Should all entities awarded the now-cancelled 2008 licences be allowed to apply for new licences and bid for spectrum? Should other entities that did not participate in 2008 (or failed to win approval) also be allowed? Should foreign players be allowed to bid on their own (with a proviso to reduce shareholdings in Indian subsidiaries to the permitted 74 per cent if successful)? Once qualification is sorted out, how should the auctions be designed to maximise revenue while being transparent and fair? A lot is at stake. India has about 900 million mobile subscribers — some 40 million of whom are affected by cancellations. The sector generates about 2.5 per cent of GDP as revenue, and its positive externalities are huge. But government action has raised the political risks to running businesses (not just telecom) in India unacceptably high for many overseas investors. The arbitrary nature of the 2008 awards and the interminable delays with 3G auctions affected 4G auctions, leading to a lack of credible bidders. And yet, rolling out more advanced networks and persuading users to migrate to high-end services will require vast infusions of capital and technical know-how.

Thus, the task before the government is multi-fold. It must find a way to reassign 2G spectrum at a reasonable price without being enmeshed in further litigation. It has to restore international credibility by acting in such a manner that the global telecom industry remains engaged and is willing to make future investments in 4G and beyond. It has to do this within a limited time span. Even if the four-month deadline on cancelled licences is extended (it may be), every day that passes without visible policy action will further stretch the patience of investors and users. A mix of political will and common sense is required to create new policy that is both pragmatic and fair. Above all, the government must look consistently forward, and not back. There is no sense in getting stuck in narrow legalistic definitions, though, of course, legal challenges must be avoided if possible. What happens in telecom will not only set the pace for the sector, but it will also redefine sentiment and investment trends in other industries.