Does it prove that there is no 2G
scam? What is its impact on BSNL?
Auction
due to cancellation of the licenses by Supreme Court
Due to the
cancellation of the 122 licenses of telecom companies by the Supreme Court, the
entire 2G spectrum of 430 MHz allotted
to these licensees was freed. As per the
directions of the Supreme Court, TRAI has given its recommendations regarding
the auction of the spectrum thus made available. Based on these
recommendations, the Government took certain decisions regarding the rules of
the auction. The auction was held 12th and 14th November
2012. While 430 MHz of spectrum was freed due to the cancellation of the 122
licenses, the Government put only 240 MHz in
the auction. The Government expected an amount of Rs 40,000 crores in this
auction.
Participants
in the auction are very few
But the participants in the auction were only
5 companies-Telewings(Uninor), Videocon, Idea, Vodafone and Airtel. The 2G spectrum
auctioned was in the 1800 MHz band. Though the 2G spectrum in 800 MHz band also was put for auction, the
bidders had withdrawn and the auction of it was cancelled.The amount got by
the Government in this auction of 1800 MHz band 2G spectrum was Rs 9408 crores only. Only 43% of the
spectrum put on auction was sold. In
this, the successful bidders have to pay one third amount immediately and the
remaining amount has to be paid in 10 equal annual instalments with 9.75%
interest.
Details of
the Spectrum purchased by the participants in the auction
In this auction
which was described as a “failed” auction by the corporate media, the winners
were as below, circle wise:
- Telewings(Uninor)
AP (5 MHz), Bihar (5 MHz), Gujarat ( 5MHz), Maharashtra (5 MHz), UP-East
( 5 MHz), and UP-West ( 5 MHz)
- Videocon
Bihar (5MHz), Gujarat ( 5 MHz), Haryana ( 5 MHz), MP ( 5 MHz), UP-East (5
MHz), and UP-West (5 MHz)
- Idea
Assam (5 MHz), Bihar ( 1.25 MHz), J&K (5 MHz), Kolkata (5 MHz), NE (
5 MHz), Orissa ( 5 MHz) , Tamilnadu ( 5 MHz), and West Bengal ( 6.25 MHz)
- Vodafone
Assam (2.5 MHz), Bihar (2.5 MHz), Haryana (2.5 MHz), HP (1.25 MHz),
J&K (2.5 MHz), Kerala (1.25 MHz), MP (2.5 MHz), Maharashtra(1.25 MHz),
NE(2.5 MHz), Orissa (2.5 MHz), Punjab (1.25 MHz), UP-E (1.25 MHz), UP-West (2.5
MHz),and West Bengal (2.5 MHz)
- Airtel
Assam (1.25 MHz)
Licenses
cancelled and the spectrum got back in the auction
All the 22
licenses (there are 22 circles in the country for allotment of spectrum and any
company has to take separate license for each circle) of Uninor (now Telewings)
were cancelled by the Supreme Court. But it took spectrum for the above six
circles only in this auction. But the cancellation of its 22 licenses by the
Supreme Court will come into effect from 18th January 2013. By that
time Telewings has to decide whether to purchase spectrum for the remaining
circles in the auction to be held further or to close its operations in all
other circles except the above 6 circles.
All the 21
licenses heldby Videocon were cancelled by the Supreme Court. But it preferred
to purchase the spectrum in this auction only for the above said 6 circles. By
18th January 2013, when the cancellation of the licenses come into
effect, it has to either purchase the spectrum for remaining circles or close
its operations in those circles.
13 licenses of
Idea (including that of Spice which merged with it) were cancelled by the Supreme
Court. But it has licenses in other circles also besides these cancelled 13
circles. However, Idea did not purchase spectrum for all the cancelled 13
circles. In this auction it got back spectrum for the cancelled 7 circles only
and got additional spectrum in Bihar.
No license of
Vodafone was cancelled by the Supreme Court, but it purchased additional
spectrum in this auction in the 14 circles as detailed above.
No license of
Airtel was cancelled by the Supreme Court. But it purchased additional spectrum
in one circle in this auction as detailed above.
Further,
although the 21 licenses of Loop, 15 licenses of Etisalat, 6 licenses of S-Tel,
3 licenses of Tata Teleservices and 21 licenses of Systema Shyam (MTS) were
cancelled by the Supreme Court, they have not participated in this auction.
After the expiry of their licenses in January 2013, their subscribers have to
migrate to other telecom operators. But Systema Shyam, owned by a Russian
Company is continuing its legal battle against cancellation of its licenses by
the Supreme Court.
Government
will get only Rs 379 crore in this year
As per the
decision of the Cabinet, the amount paid by the Companies for the licenses
which were cancelled by the Supreme Court has to be adjusted against the amount
to be paid by the companies for the spectrum they purchase in this auction.
Telewings
(Uninor) has to pay a total amount of Rs 4018 crores for the spectrum it
purchased in this auction. In this, one third, that is, Rs 1339 crores has to
be paid in this year, and the remaining in 10 annual instalments. But the
amount to be refunded to it for its cancelled licenses is Rs 1658 crores. This
has to be adjusted against the amount to be paid by it for the spectrum
purchased in this auction. Therefore
Telewings (Uninor) need not pay any amount this year.
Videocon has to
pay a total Rs 2222 crores for the spectrum it purchased in this auction. In
this it has to pay one thaird, that is, Rs 733 crore in this year. But the
amount to be refunded to it for the licenses cancelled is Rs 1500 crore. Hence
it need not pay any amount for this year as well as for next year.
Idea has to pay
a total Rs 2030 crores for the spectrum
it purchased in this auction. In this, it has to pay one third, that is, Rs 677
crore this year. But the amount to be refunded to it for the licenses cancelled
is Rs 1170 crores. Hence it need not pay any amount this year.
Vodafone and
Airtel together have to pay Rs 1138 crores. Their licenses are not cancelled
and hence Government need not refund any amount to them. If they decide to pay
one third of this amount this year instead of paying the entire amount ( Option
is available either to pay one third immediately and the rest in 10
installments with 9.75 per cent interest or to pay the entire amount at a time
immediately), then the Government will get Rs 379 crores only.
If the
realisation in this auction as expected by the Government is Rs 40,000 crore,
then the Government would have got one third of it that is Rs 13300 crore in
this year. But in view of the poor response to the auction, the Government will
get Rs 379 crore only in this year.
Whether the
CAG gone wrong?Whether really there is no 2G scam?
After this
auction, the Communications Minister
Kapil Sibal, Finance Minister Chidambaram and other Ministers of UPA are
campaigning that the 2G scam is a myth created by the wrong calculations of the
CAG (Comptroller and Auditor General). They are asking the question that If the
loss to the exchequer in the 2G scam is Rs 1,76,000 crore as calculated by the
CAG, in the auction, the amount of payment to the Government should have been
atleast Rs 40,000 crore as expected by
the Government(since only a part of the spectrum available due to cancellation
of the 122 licenses was put for auction)where as only Rs 9407 crores was
realized in the auction. The Ministers and the UPA Government and the Congress
party are now saying that in fact there is no 2G scam and it is only a creation
by the CAG. The media owned by the Corporates is also singing the same song. The
Economics Times has written an obituary to 2G scam. At the best they are
willing to agree that there may be some irregularities committed by the then
Minister A.Raja, but there is no 2G scam.
On this basis,
they are further campaigning that the unnecessary and mythical allegations of
corruption and scams has resulted in investors keeping away from our country
and also resulted in fear among the officers and ministers for taking decisions
lest those decisions be construed as corrupt decisions. According to the UPA
Government and the Corporate media, the 2G scam, and other scams are myths
created by CAG and others and resulted in stalling the progress of the country.
The Corporates, the politicians and the bureaucrats responsible for these mega
scams now want to take the 2G auction failure as an opportunity to paint a
picture as if the scams are only myths. They want thus to resort to further
scams by creating a conducive atmosphere. But what is the fact?
2G scam is
real, and not a myth
The CAG’s
calculation of loss of Rs 1,76,000 crore to the exchequer on account of 2G scam
was related to theyear 2008 in which year the said 2G licenses were issued
(subsequently cancelled by the Supreme Court). At that time the number of
mobile subscribers was fast increasing and roughly 80 lakhs of subscribers were
being added every month. There was severe competition in the market. There was
abundant money supply in the money market. The sensex touched the peak of 21078
points two days before the scam in 2008. The average revenue per user (ARPU) got by the telecom companies at that time was
Rs 316/- per month. 575 applicants have qued up for licenses. Under such
favourable conditions, it would have been possible to realise Rs 1,76,000 crore
if the spectrum was sold in the auction. Instead, it was given at dead cheap
price on the basis of the illegal FCFS(First Come First Served) principle.( Even in 2010 also the market was
rising and at that time in the 3G auction, more than 1,00,000 crore was
realised by the Government. )
But the
situation changed now. There is no significant increase in the number
of mobile subscribers and the ARPU is only Rs 97/- per month. Hence the present
result of the auction when there is no rise in the market cannot be compared
with 2008 when the scam occurred. There was definitely the scam and the
calculations of the CAG regarding the scam were nearer to the truth.
Even in this
auction also, for 20 licenses (Telewings-6, Videocon-6, Idea-8) the amount
realized was Rs 8270 crores , whereas the amount got by the Government for the 122 licenses issued by A.Raja in such
most favourable conditions in 2008 was a mere
Rs9200 crore only.
Further, it is
to be noted that in 2007 November, S-Tel made an offer a for for spectrum as
per which the amount for the 122
licenses would have been Rs 67,000 crore, whereas the amount got was Rs 9200
crore only.
Also, on the
basis of equity sold by the new licensee Swan, the value of the 122 licenses
issued in 2008 would have been Rs 57000 crore whereas the amount got was only
Rs 9200 crore. On the basis of 3G auction held in 2010, the CAG made the
calculation for the 122 licenses of 2G issued in 2008 and the value should be
Rs 1,76,000 crore where as the value got was only Rs 9200 crore.
Therefore
definitely there was the 2G scam and it was a megascam costing the exchequer
anywhere between Rs 57000 crore to Rs
1,76,000 crore.
Is the base
price fixed in this auction too high?
The owners of
the private telecom companies and the telecom minister Kapil Sibal are blaming
the TRAI whose recommendation resulted in fixing the minimum auction price
fixed in this auction for 5 MHz of
spectrum for all the 22 circles at Rs 14000 crore. They are campaigning that
such a high level base price resulted inlack of considerable participation in
the auction. Some of them have earlier argued that the base price should be
fixed as low as Rs 1658 crore which was the price fixed in 2001. Thus they want
the base price to be very very low so that they can get spectrum again at dead
cheap rate, inspite of the auction.
They are arguing
that the TRAI has done a wrong calculation by fixing the base price of 2G
spectrum as more than the price of 3G spectrum realized in 2010. They are
asking the question how the 2G spectrum of lower capcity can have more value
than the 3G spectrum of higher capacity.
Liberalisation
of 1800 MHz band spectrum justifies its pricing more than the 3G spectrum price
The 3G services
are being provided on 2100 band spectrum, which is popularly called as 3G
spectrum. 2G services are being provided
on 900 MHz band as well as 1800 MHz bands spectrum. For the present we are
concerned with 1800 MHz band spectrum which is auctioned. Therefore any body
will think that the 3G spectrum (2100 MHz band spectrum) is more efficient than
2G spectrum (1800 MHz band spectrum). But in fact, the 1800 MHz band spectrum
is more efficient than 2100 MHz band spectrum. The capex(Capital expenditure)
and opex(Operational expenditure) are lower for lower frequency bands when
compared with higher frequency bands. This is because for covering the same
area, 1800 MHz band spectrum requires less number of towers compared to 2100
MHz band spectrum. Besides the GSM technology, the 1800 MHz band spectrum can
be utilized for advanced technologies like UMTS and LTE. By January 2012,
approximately 50 devices were available with LTE technology which can be
utilized on 1800 MHz spectrum, for broadband services. Among these 50 devices
are routers 16, dongles 15, modules 13, tablets 2, and smart phones 4. ITU(International Telecom Union, the body
affiliated to United Nations and responsible for regulating telecom systems
world wide) has already earmarked 800/900/1800 MHz bands for IMT advanced
services. Commercial LTE services (4G services) have been lauched in several
European countries and in Saudi Arabia and Hongkong utilizing 1800 MHz band
spectrum. Providing widespread coverage with LTE in the 1800 MHz band is
substantially cheaper than covering the same area with LTE using higher
frequency bands.
Thus the 1800 MHz band spectrum which is at
present restricted by license condition for providing 2G GSM services only , is more
efficient than the 2100 MHz band spectrum (3G spectrum) and hence requires to
be priced more than the 2100 MHz band (3G) spectrum. Whoever purchased this
1800 MHz band spectrum in the auction held on 12th and 14th
November 2012 are given the right to use it for providing any service including
4G services with any technology. Thus the use of 1800 MHz band spectrum is
liberalised along with this auction. Hence the TRAI has done the correct thing
by recommending more base price for the 1800 MHz band spectrum auction compared
with the 2100 MHz band (3G) spectrum auction. In fact while the TRAI
recommended Rs 18000 crore base price for 5 MHz spectrum for all the 22
circles, the Cabinet reduced it to Rs 14000 crores only, to favour the telecom operators.
The private
operators are arguing that there is no benefit of liberalisation of spectrum as
far as our country is concerned, since most of the people cannot pay for the
broadband services with LTE technology (4G services) and even 3G services are
not that much picking up. This will be so for two or three years more until the
devices become less costly. They are also arguing that since for another 2 or 3
years, there will be no significant increase in 3G/4G services, the 1800 MHz
band spectrum need not be treated as liberalized spectrum till then and the
base price in this auction should have been decided by assuming the 1800 MHz
band spectrum as useful for 2G services only. They further stated that when the
technological development reaches such a stage after 2 or 3 years when the
devices become cheap and more and more number of people can afford 3G/4G
services, at that time additional amount can be collected for liberalization of
the spectrum. But the difficulty is that the auction cannot be held now at a
lower price and then the price cannot be increased further after two or three
years by an administrative order of the Government. It will be illegal. Hence
the base price has to be decided treating 1800 MHz band spectrum as liberalized
spectrum.
As per the data
revealed by the TRAI in its recommendations, the liberalized spectrum capable
of voice and dataservices in 2G, 3G or newer technologies are fetching higher
prices in the auctions worldwide. The price arrived in these auctions per MHz
per population is in the range of 0.4 to 0.6 euros in Europe . As against these
prices in other countries, the price of 3G spectrum found in India in the
auction in 2010 was 0.21 euro only.The base
price of Rs 3622 crore per MHz spectrum for all 22 circles recommended by TRAI
for 1800 MHz band spectrum works out to
only 0.25 euro per MHz per population. The per minute cost increase for the
subscriber as a result of the auction of spectrum on the basis of this base
price, as per the calculation of TRAI will be 4 paise in 2012-13 and it will be
reduced to one paisa in 2031-32. Moreover, by 2015 the main driver for the
increase in revenue will be data access services, not voice services.
Therrefore there will not be any significant increase in tariff on oaccount of
the base price fixed by the TRAI for the auction.
Whether the
base price fixed by the TRAI will result in significant increase in tariffs?
TRAI has given
detailed calculations in its recommendations on spectrum auction in this
regard. As per these calculations, with the base price fixed by it and its
further increase in the auction, the increase in tariff per minute will not be
more than 5 paise in 2012-13
The reason
for the resistance of the private operators against the base price Rs 14000
crore
The Cabinet has
taken another decision. As per this decision, the existing operators have to
pay for the 2G GSM (1800 MHz and 900 MHz band spectrum together) spectrum they
are having over and above 4.4 MHz, an amount equal to the price found in this 2012
auction, proportionately for the remainining period of their current license. The
same rate has to be paid for the 1800 MHz spectrum they will get on renewal of
their license when the current license expires. For example, the licenses of
Airtel will expire in 2014 and Vodafone in 2015. Therefore they ahve to pay for
the spectrum they are holding beyond 4.4 MHz proportionately for the period
starting from 1-1-2013 till the expiry of their license in 2014/15. Again for
the next 20 years of their renewed license starting from 2014/15, they have to
pay for the spectrum in 1800 MHz band at the same rate decided in this 2012 auction.
Hence all the private telecom operators are interested in seeing that the
spectrum price does not go beyond the base price fixed for the auction held on
12th and 14th November 2012.
Thus it is clear
that the private operators have colluded to see that the spectrum price in this
auction is fixed at the base price. Also, for the lucrative Circles Delhi and
Mumbai they want to see that the spectrum price should be still lower. Hence no
bidding is there for Delhi and Mumbai in this auction.
Collaboration
to keep the spectrum price low and to increase the tariffs
Once the private
operators have paid the one time payment for the spectrum they are holding
beyond 4.4 MHz for the remaining period of their license, as per the price
found in this auction, they will become eligible for providing 4G services also
on their existing 1800 MHz band spectrum. Also for their next term of their
license, they will be allowed to continue with the 1800 MHz band spectrum at
the same price that is found in his auction. Therefore as a long term project
to keep the spectrum price low, the private operators have collaborated. After
this, their next step is to increase the tariffrs.
What about
BSNL and MTNL?
BSNL and MTNL
are having sufficient spectrum and they need not bid for the spectrum in this
auction. But like any other operator, they ahve to pay the one time amount for
the 2G spectrum they are holding over and above 4.4 MHz , proportionately for
their remaining period of current license, at the rate found in this auction.
At the rate of the base price of Rs 14000 crore fixed for this auction for all
the 22 circles proportionately for its remaining license period, it is
estimated that BSNL has to pay Rs 6250 crores for the 20 circles (It is not there in Delhi and Mumbai). In this
auction held on 12th and 14th November 2012, the bidding
was there for 18 circles and there was no bidding in case of Delhi, Mumbai,
Rajasthan and Karnataka. In case of BSNL, since there is no bidding in
Karnataka and Rajasthan, it has to pay for the spectrum it is having beyond 4.4
MHz in all other circles(18 circles). Therefore it may have to pay around 5800
crores. One third of it will be Rs 1933 crore, which is to be paid in this year
(It is to be noted that further, when the spectrum is auctioned in case of
Karnataka and Rajsthan circles, BSNL has to pay the pro-rata amount for the
remaining license period for these two circles). But it was stated by the Minister Kapil Sibal
that a note will be put up to Cabinet seeking its approval for exempting BSNL
from such payment. Whether it will happen and if so in what shape is not known.
If BSNL is exempted from the payment, does it mean that BSNL will be eligible
for providing 4G services on its 1800 MHz band spectrum, like others who are
paying the amount? Or, does it mean that the Government will pay this amount
for BSNL so that BSNL will be eligible to provide 4G services on its 1800 MHz
band spectrum like other operators who pay the amount? It is to be noted that
the current license period of BSNL is until 2020 since it was given license for
mobile services in 2000 only.
The Govrnment
should pay this amount for BSNL and allow the liberalisation of spectrum for
it. BSNL and MTNL are facing losses mainly due to the landline operations which
are essentially loss making, but socially required. Also As PSUs they are
catering to the security requirement sof the country in telecom sector. Besides
the social obligations of maintaining loss making landlines and national
security, they are carrying out several other social responsibilities including
prevention of increase in tariffs by
private operators. Hence it is the responsibility of the Government to provide
spectrum in any band without any upfront
payment to BSNL and MTNL and to allow them to utilize the spectrum in any band
to provide any service including advanced services without any one time payment
for that purpose. Otherwise there will not be enough competition in the
advanced services and the private operators will fleece the subscribers.
Moreover, the PSUs making losses for carrying out social responsibilities
cannot be allowed to become unviable or sick by compelling them to pay such huge
amounts for the spectrum. If they become sick and unviable, the national
security and public interest will suffer.
The game of
the Corporates, the UPA Goverment , the
BJP and the foreign should not be allowed
The Goveernment,
the private telecom operators are colluding to see that the base price for the
auction is further reduced for the lucrative circles Mumbai, Delhi and
Karnataka. They also want to utilise their manufactured poor response to the
auction asthe ground for white washing the 2G scam so that they can further
resort to low pricing of spectrum. At the same time they want to increase the
tariffs.They also want to campaign that in the name of the allegations of scams,
the progress of reforms should not be stiopped. People should think that scams
are not happening even though they are really happening, so that they can go
ahead with their reforms for looting the country. The “opposition” BJP is
interested in talking against scams, but not against the root cause of the
scams, that is big Corporates. This is because the BJP and the regional parties
like TDP, DMK,AIADMK, sivsena, SP, YSRC, TRS (except the Left parties) etc represent the interests of the capitalist
classes. It is also to be noted that the foreign capital interested in
investing in telecom sector is also demanding lower price for spectrum, only to
grab quick profits. The corporate media is singing the same song.
This game of the
UPA Government, the Corporates, the BJP and the media should be defeated and
the Government must be pressurized for not reducing the base price of the
spectrum any further and to exempt BSNL and MTNL for any payment for the
spectrum already allotted or to be allotted and also for allowing
liberalisation of spectrum for BSNL and MTNL without any payment. The PSUs BSNL
and MTNL must be strengthened by the Government so that they become the
instruments to defeat the games of the private operators.
-----P.Asokababu
