Getting set for the auctions

Almost nine months after the Supreme Court cancelled 122 telecom licences, the process to get back licences began today. Bharti Airtel, Vodafone, Idea Cellular, Tata Teleservices, Videocon Telecommunications and Telewings (part of Norway's Telenor) have put in their bids to be part of the auction for spectrum in the 1800MHz band.

Interestingly, there were no applications from Mukesh Ambani controlled Reliance Industries, Anil Ambani controlled Reliance Communications and Russian leader Sistema Shyam Teleservices Ltd (that operates under the MTS brand.

However, it is widely believed that post the auctions, Videocon  will join hands with RIL, quite on the lines of how Infotel Broadband was acquired by RIL soon after the mid-2010 auction of 3G spectrum. 

Meanwhile SSTL has come out with a statement that says: “Sistema Shyam TeleServices Ltd (SSTL) has consistently maintained that it has been unfairly penalised in the February ruling of the Supreme Court and has filed a Curative Petition seeking to restore its licences. SSTL was the only operator to have applied for a Pan India CDMA spectrum in 2008. There is no finding or suggestion by the CAG report that CDMA spectrum was equally or anywhere near in demand as GSM. SSTL believes it has a strong case and is determined to await its hearing.

In this context, and considering the level of recommended spectrum prices which makes the business case unviable, SSTL had no choice other than not to take part in the 2G auctions for 800 Mhz. SSTL would like to once again reiterate that it is hopeful that the highest court of the land will speedily look into the merits of its case and will give it justice.”

It now remains to be seen how many of these operators will go the whole hog and bid for spectrum. The action is just about beginning.

Spectrum pricing blues continue

The confusion continues!

The Empowered Group of Ministers (eGoM) met again today to decide on the base price for auctioning 2G spectrum. While the meeting is over there is yet no clarity on what has been decided. While communications & IT minister Kapil Sibal refused to give details, sources privy to the deliberations said the eGoM has decided to lower the TRAI suggested base price. The eGoM has also agreed to allow operators to stagger the payment.

Though the numbers are still not available, the base price for the auction of 5MHz of spectrum could range between Rs 14,000 crore to Rs 16,000 crore in the 1800MHz band. In that case the spectrum usage charge (SUC) would range between 3-6%. At Rs 16,000 crore the SUC would be 3% and would rise by one percentage point as the base price increases by Rs 1,000 crore.

However, no decision was taken on the one-time fee that DoT had proposed to levy on existing telecom operators by making changes in their licence conditions.DoT wants incumbents to pay auction-discovered price for the spectrum they hold, a move bitterly opposed by CDMA operators.The Union Cabinet will take a final decision on the prices of telecom spectrum and one-time fees payable by incumbent telecom operators.

It is unlikely that the Cabinet will take a decision on the pricing of spectrum till such time as the eGoM comes up with a formula for prospective licensing. Essentially, the spectrum drama continues.

Waiting for EGoM

After many twists and turns, the Empowered Group of Ministers (EGoM) has to take a call on the base price for auction of 2G spectrum. But, ministers are wary of getting into the widening swamp of 2G. Pranab Mukherjee decided to go ahead and file a Presidential Nomination rather than come up with a number. Agriculture minister Sharad Pawar who was appointed to head the EGoM pulled out before the first meeting.

So what happens now?

First, the EGoM has to decide on the issue of providing a level playing field to new operators. In a Cabinet Note, the Department of Telecommunications (DoT) has sought imposing a one-time charge on incumbent operators. It argues that new operators have to pay the discovered price. Since incumbents have paid only Rs 1658 crore, they need to match the discovered price for the number of years their licence is valid.That puts a huge burden on later entrants like Tata Teleservices and Reliance Communications. However, that would allow the incumbents to offer all services--2G, 3G or 4G.

DoT has come with various options based on from when the operator is to be charged and how to base it on the amount of spectrum held. 
 

The retrospective charge would kick in from the time the licence was issued. However, that is part of the Presidential reference. The other is a prospective charge from when the EGoM recommends it. If operators decide not to pay, they would be able to offer only 2G services. That would be a clear negative in the longer term.

The second is on the spectrum held by operators. The first option is to charge operators for all spectrum they hold, the second for spectrum over 4.4MHz and the third for spectrum over 6.2MHz in a circle. It is only the incumbents that have spectrum exceeding 6.2MHz and state-owned operators BSNL and MTNL that have spectrum exceeding 6.2MHz.  

 For now, the telecom industry is waiting for the government to get out and clear the mess. 

No base price for spectrum yet

It was a day of confusion, and yet a lot of clarity.

After all, at 5:30 pm the Empowered Group of Ministers (EGoM) was to meet primarily to decide on the base price for auctioning 2G spectrum in the 1800MHz band. That one number would change the fortunes of quite a few telecom companies and that of thousands of telecom industry employees.

First it was postponed to 8:30 pm. Then it did not happen. Incidentally, there was no official comment on why it was postponed. Though nobody is willing to say it in so many words, it is believed that finance minister Pranab Mukherjee was not comfortable taking a decision on the issue just days before he files his candidature to be India's next President.

That decision will now have to be taken by the next finance minister, which in all likelihood would be Prime Minister Manmohan Singh himself.

Pranab's chances of becoming President depends on the support of Samajwadi Party chief Mulayam Singh Yadav. So, the government would also not want to take a decision on pricing that would rankle Mulayam.

So, the process for fixing the reserve price has been delayed yet again. The losers in this are the new operators: Norway's Telenor and Russia's Sistema JSFC. Or will they be losers? Time will tell. Watch this space.

Rahul Khullar new TRAI chairman; Sarma leaves with a sting in the tail

In classic Indian government style, it finally went down to the wire. On Saturday, JS Sarma completed his three-year term as chairman of the Telecom Regulatory Authority of India (TRAI). He also submitted a 60-page response to the clarifications sought by the Department of Telecomunications (DoT) on April 23.

On Monday, 14 May current commerce secretary, Rahul Khullar will take over as TRAI chairman.

However, Sarma did not show any leniency to operators as he went. In his reply to the DoT, there is no reduction in the reserve price that he suggested. Also, in the first auction, only one operator will get spectrum in the 1800MHz band. That is because Sarma has reserved spectrum in the 1800MHz band for refarming. Starting 2014, licences of operators with spectrum in the 900MHz band will expire.

Only in the case of CDMA operators, he has suggested where enough spectrum is not available, the reserve price should be 1.3 times the price of 1800MHz band spectrum. Earlier he had recommended it as double the price of 1800MHz band spectrum.

Lastly, as a parting shot, Sarma has raised the spectrum usage charge to 3% from his original recommendation of a flat 1%.

It remains to be seen what DoT does with the suggestions. It is not imperative for DoT to accept the recommendations.

It is believed that DoT will just opt for the auction of 1800MHz spectrum and junk all the other suggestions. That would be taken up by Khullar. Also, now that former telecom secretary Siddharth Behura is out on bail, there is a feeling that the worst is over for the sector.

Let's hope Khullar can do what no other regulator has managed till date--be strong and draw the road map for forward looking policies.

Raja moves bail application

It is action time again.

More than three months after the Supreme Court cancelled 122 licences issued in 2008, the doors seem to be opening for the prime accused in the 2G spectrum qallocation case.

After being in Tihar Jail for over a year in the 2G spectrum case, former telecom secretary Siddharth Behura was granted bail today. Immediately after the court granted bail to Behura,  his boss and former telecom minister Andimuthu Raja who has been in jail for the past 15 months moved a bail application. Raja is the prime accused in 2G spectrum allocation case. His plea will be heard on Friday, 11 May.

With Behura getting released, Raja is the only one still in jail. He was charged with conspiracy, cheating, criminal misconduct and abusing an official position in the allocation of 2G spectrum licences which were believed to be rigged.

Raja said he should be granted bail as he is unable to put his case before the Public Accounts Committee (PAC) of Parliament and the Joint Parliamentary Committee (JPC) which is looking into the various aspects of the issue.

The interesting days are just about to start.

Will this chaos lead to some good?

It has been a long time since I have been here. However, quite like India, the telecom scene in India also is a case of change, but yet no change.

We are currently in the midst of a proposed New Telecom Policy. That it was supposed to come in 2011 is a different issue. The action started after the Supreme Court cancelled 122 licences issued to eight operators in 2008. It wanted the government to auction all spectrum in future. With the SC getting into the act (everything needs a push from the SC)the Department of Telecommunications, the Communications ministry and the Telecom Regulatory Authority of India (TRAI) are looking to clean up the mess.

Isn't that expecting too much.

Well, this time round, TRAI managed to spook it further. First it recommends a reserve price of Rs 3,622 crore per MHz for 1800 MHz band spectrum. That's a reserve price of Rs 18,100 crore for 5MHz of spectrum. Two, it ensures that only one block of 5MHz is up for auction, despite the fact that the SC had cancelled licences of eight operators. Third, it ensures that there will be spectrum re-farming in the 900 MHz band.However, it suggested that operators need to pay only a quarter of the discovered price in the auction immediately. However, that is unlikely to pass muster with the DoT and the empowered Group of Ministers.

What it has done is make almost all operators are unhappy. The new ones hate it because there is only one band in each circle at a huge price. Of the eight operators whose licences were cancelled, at least three have exited. Two are incumbents. So that leaves three new operators--Uninor, Sistema Shyam and Videocon Telecommunications in the fray. The original incumbents find the new reserve price for both 1800 MHz and 900 MHz band too high. The operators who came in between need to re-farm their 800 MHz band.

But is everything all that dark? Not really. DoT is speaking to the defence ministry to vacate spectrum so that at  least three licences can be given in each circle.

So, is this the beginning of a new dawn? Maybe, since the SC has brought in the first wave of consolidation. The next few months should see more action.

Stay tuned. I am back to keep you updated on the go.