As per
the Supreme Court judgment, the spectrum that would be available after
implementation of the cancellation of the 122 licenses given illegally has to
be auctioned. The auction process has to be completed by 2-6-2012(the date of
completion of 4 months after the judgment of the Supreme Court.
But it
is reported in the newspapers that the DoT is finding it difficult to auction
the spectrum within such a short period of 4 months. It says the process of
auctioning the spectrum will require 13 months time. It will require 95 days to
study the TRAI’s proposals on the auction of spectrum(The TRAI is yet to submit
its proposals), to fix the reserve price for the sale of the bandwidth of the
spectrum and get the approval from the empowered GoM(Group Of Ministers)
looking into spectrum related issues. After this, another 245 days are required
for completion of the auction process.The DoT, as reported in the newspapers,
may seek the approval of the Supreme Court for extending the deadline for
completing the auction process.
Besides
this, the DoT also has to decide on the fate of the licenses given between 2001
to 2007, since those licenses(total 110, 73 GSM and 37 dual technology) also
suffer from the same irregularities and illegalities contained in the 122
licenses cancelled by the Supreme Court.
The
DoT also has to decide about what has to be done with the 3G spectrum granted
to Idea Cellular and S Tel in the service areas (circles) where their 2G
licenses were cancelled by the Supreme Court.
As per
an estimate, after the cancellation of the 122 licenses, the DoT will have 624.60
MHz of 2G spectrum at its disposal. It will go upto 923.80 MHz after the defence forces vacate the
spectrum available with them by migration to Optic Fibre Cable.
It is
understood that the telecom companies, whose licenses are cancelled by the
Supreme Court, are adopting different strategies. S Tel, which has its
operations in 6 circles with 35 lakh customers, has sent SMS to its customers
that they can use MNP to migrate to other operators. It plans to close its
operations since it is not willing to participate in the upcoming spectrum
auction.It found its business unviable. It’s spokesman stated, “ Our
infrastructure and media vendors have intensified disconnection of services,
since the passing of the judgment by the SC, considering that there is now no
chance of the banks disbursing the funds. Necessary communication has already
been issued to the MNP Serrvice Providers to ensure that port outs are
seamlessly carried out for the benefit of the subscribers who choose this
option”.
But on
the other hand, the Uninor and Systema Shyam(MTS), whose licenses also were
cancelled by the Supreme Court, have intensified their advertisements to
attract more subscribers, hiked their dealers’ margins, and even in some cases
cut the tariffs, so as not to lose their customers. Uninor stopped its plans to
raise tariffs, issued advertisements in massive scale saying “ 4 crore people
would love us to stay” and promoting “pay less, talk more” campaign. MTS alos
resorted to increase in advertisements and offered rock bottom tariff plans. It
has 1.5 crore customers. It posted a loss of Rs 1009 crore for the quarter
ending December 2011. Inspite of this, it resorted to tariff cuts to attract
customers. It appears that Etisalaat DB, which operates under Cheers brand with
1.6 million (16 lakhs) customers and hence a clear laggard in a market of 85
crores customers, has decided to close its operations.
Telenor,
the Norway Company, a partner in the Uninor along with the Indian real estate
company Unitech, has served a notice to Unitech for separation on account of
fraud and mis representation. Telenor
invested Rs 14000 crores so far in India. Telenor wants to form a new entity to
continue its existing business including its existing customers and employees.
The said new entity will participate in the auction to acquire the spectrum.
The new entity will have 74% equity from the Telenor and the remaining 26% from
its Indian partners. Till such time the transfer of customers and employees to
the new entity takes place, they will continue with the Uninor. But the
Unitech, the minority partner in the Uninor, is opposing this transfer of the
entire business of Uninor to such a new entity and is threatening to fight
legally and also will try to block such a transfer, in the Board
meeting of the Uninor. But Telenor retorted saying that in case of fraud and
misrepresentation, it can unilaterally declare the shareholders’ agreement as
cancelled.
While
DoT has not filed any review petition against the Supreme Court judgment
cancelling 122 licenses, the Idea Cellular and Videocon filed clarificatory
petitions in the Supreme Court seeking a clarification for exempting their
licenses from cancellation. Idea says it has applied for the license in the
concerned circles in 2005 it self, but it has been delayed unjustly and has
been clubbed among the 122 licenses unjustly.If it was given the license with
in 30 days as per the procedure, it would not have been a part of the licenses
required to be cancelled as per the Supreme Court judgment (The license of Idea
Cellular for 9 circles were cancelled by the Supreme Court. But if the licenses
of Idea are not to be cancelled, then the licenses of no body need be cancelled
since the same irregularity is involved in all the licenses whether allotted in
2008 during the tenure of the Minister A.Raja. If its licenses are to be
cancelled, then all the licenses allotted during 2001 to 2007 also require to
be cancelled since the same illegality prevails in all the licenses issued
between after 2001, until 2008). Tata Teleservices may also file petition in
Supreme Court for exempting its 3 licenses from cancellation. Uninor and
Sistema Shyam also likely to file review petitions requesting not to cancel
their licenses. The telecom minister Kapil Sibal denied that the government
plans to join the case if any of these telcos filed a review petition.
The
operators like Uninor, MTS etc whose licenses are cancelled by the Supreme
Court demanded the Government that the auction for the spectrum should take
place in two stages and in the first stage, only the companies whose licenses
are cancelled by the Supreme Court only should be allowed. But the old
operators like Airtel, Vodafone etc have demanded that all should be allowed in
the auction so that they can get additional spectrum.
The
DoT and TRAI are unlikely to agree for thee demand of the new entrants whose
licenses are cancelled. The telecom department may allow the more than 30
companies who applied for license in 2008. This will pave the way for companies
outside this list of 30 companies as well as the incumbents like Airtel,
Vodafone etc to participate in the auction. Airtel which demands that the
auction should be open for all says that allowing all will result in most
efficient allocation of spectrum and a better value to the government for the
spectrum.
It is
alkso understood that the telecom department may allow foreign companies to
participate in this auction without an Indian partner, with 100% FDI, with the
condition that after getting the spectrum in the auction, such foreign companies
have to reduce their stake to 74% by allowing Indian partners for the remaining
26% stake, with in 6 months. Such a method, it was said, was already adopted in
the case of the auction of 3G and BWA spectrum. For example, the US based
Qualcomm was allowed to participate in the BWA spectrum auction and after it
succeeded in getting the spectrum in the auction, it was asked to dilute its
stake from 100% to 74% within 6 months.
But
whether such an auction allowing all will result in a higher price for the
spectrum and consequent increase in the tariff to the customer? As per the
analysts of the telecom sector, the price of the spectrum would not escalate in
the auction as happened in the case of 3G spectrum auction. The reason is that
the financial conditions of the old players like Airtel, Vodafone, Reliance etc
are not strong enough to allow such escalation of spectrum price. The old
companies have already invested huge amounts for 3G spectrum by taking loans
and going for loan again to get 2G spectrum at a higher value will be difficult
for them. As on 31-12-2011, Airtel has a debt of Rs 72,670 crore, Idea Cellular
Rs 13,076 crore and that of Reliance Communications Rs 38,200 crore.
Another
analyst says that while the old operators like Airtel, Vodafone etc may not be
able to bid aggressively, the foreign Companies like Telenor (Uninor),
Etisalat, backed by their Governments would be in a better financial position
to bid.
But
all the companies may be cautious enough not to bid for higher amounts for the
spectrum.
The
Government may take its final decision on all these issues, with in the next
one month.
The
net result may be that the role of FDI will further increase due to the
decisions likely to be taken by the Government. The policy direction of the Government
is such that it tends to encourage foreign and Indian big capitalists and at
the expense of the public sector and the people. Why should the foreign
companies with 100% FDI be allowed to participate in the bidding when the rule
is that the FDI in a telecom company should not exceed 76%? Why should the Old
Operators like Airtel, Vodafone etc having more than 6.2 MHz spectrum be
exempted from paying the charge for the extra spectrum held by theem beyond the
6.2 MHz spectrum? Why the BSNL, which is a PSU carrying enormous social
obligations, pay the price for the 2G and 3G spectrum where as in China, the
PSU telecom companies are not asked to pay thee price for the spectrum?
(Based
on the news in the Economic Times and The Hindu Business Line)
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