Thursday, November 22, 2012

Know Their Minds

"Many including me would have relished seeing Kasab lynched and tortured before being put to death" --Bollywood  Director  Ramgopal Varma

 (His film on 26/11 is going to be completed and now he says, " perfect icing on the cake, I got this ending of Kasab's hanging")

"A public hanging of Kasab would have been a lesson for any body who causes loss of life in our country"..."Gandhian" Anna Hazare

"Why should I rejoice Kasab's death? I will rejoice when little innocent children will stop being taught to kill in the name of God n Religion"....Tweet from Actor Ashis Choudhary whose sister Monica and her husband too were killed on 26/11. He told , "Justice is done to a small part of a huge problem" "I am a father, I don't want to set that as an example to my children"

Hanging Kasab for his crime is different. But why it should be made as a public tamasha? For whose benefit?

Beware of the Evil Forces

The evil forces are inciting communal hatred by demanding hanging of terrorists of one particular religion excluding the terrorists of other religions. In fact, terrorism is terrorism, irrespective of the religious affiliation of the concerned terrorist.

Hanging Kasab is not the final justice against the terrorists responsible for the 26/11 Mumbai killings. Kasab is only a small fry. The masterminds behind the 26/11 incident are protected by Pakistan and America. Though the evil forces inciting communal hatred are condemning Pakistan for protecting some master minds behind the 26/11 killings, they are silent about the protection given by the US to some master minds behind those killings. David Headley is a Pakistani American terrorist in prison in America, but protected by America. Though he was one of the master minds behind the 26/11 killings, the American Government has not agreed to extradite him as demanded by India. But the evil forces inciting communal hatred in the name of fighting against terrorism are silent about this role of the American imperialism. These evil forces demanding hanging of terrorists of a particular religion, are totally silent and in fact support, the terrorists responsible for inciting communal riots and killing thousands of people. Why they are not demanding hanging of the persons responsible for the communal killings in Gujarat and elsewhere?

To fight against and defeat the terrorism, the terrorists irrespective of their religious affiliation are to be opposed. The biggest terrorist the US imperialism responsible for violent killings of people in so many countries and aiding and abetting the terrorists must be opposed. The problem of poverty and unemployment being utilised by the terrorist organisations as a breeding ground for creating terrorists has to be solved. All terrorists irrespective of their religious affiliations must be punished. 

Sunday, November 18, 2012

The Spectrum Auction held on 12th and 14th November 2012

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:
  1. Telewings(Uninor)
AP (5 MHz), Bihar (5 MHz), Gujarat ( 5MHz), Maharashtra (5 MHz), UP-East ( 5 MHz), and UP-West ( 5 MHz)
  1. Videocon
Bihar (5MHz), Gujarat ( 5 MHz), Haryana ( 5 MHz), MP ( 5 MHz), UP-East (5 MHz), and UP-West (5 MHz)
  1. 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)
  1. 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)
  1. 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.


Friday, November 9, 2012

Whether BSNL and MTNL will be given relief from payment of one time charge for spectrum held by them beyond 4.4 MHz?

As per the decision taken by the Cabinet on 8-11-2012, all the telecom operators have to pay one time charge for the spectrum held by them beyond 4.4 MHz and it is reported that as per this decision, the BSNL and MTNL together have to pay about Rs 12000 crore.

After taking of this decision by the Cabinet, Sri Kapil Sibal is reported to have told that the Communications Ministry will separately send a note to the Cabinet for exempting BSNL and MTNL from such one time payment. This is the news that appeared in the website “” on 9-11-2012.

But the private operators are opposing such exemption to BSNL and MTNL. They are likely to challenge any such decision for exempting BSNL and MTNL, as per the news paper reports. It is argued that in case the PSUs are exempted from this payment, they will not require to raise the tariffs whereas the private operators will require to raise the tariff after paying this one time charge. The private operators are arguing that it will be an unfair advantage to PSUs BSNL and MTNL if they are exempted.

If the Government decides to exempt BSNL and MTNL from such payment for spectrum and if it results in tariffs not increasing, it will be good for the country since people will be benefited  In fact, the Government should decide to support BSNL and MTNL fully in the interest of the Country as is being done by China for its PSUs in telecom services sector. China is not collecting any charge for the spectrum allotted to its PSUs.

Decisions of the Cabinet on 8th November 2012 on spectrum allotted to existing telecom operators will lead to destruction of BSNL and MTNL

Back Ground for taking these decisions

Consequent to the Supreme Court’s judgment cancelling 122 licenses given to the new telecom operators in 2008 illegally, the  GSM spectrum given to them in 1800 MHz band has become free. As per the order of this judgment, the Government is auctioning this spectrum thus become free. The auction will start on 12-11-2012. The Government decided that the base price in this auction will be Rs 14000 crore for 5 MHz quantity of spectrum for the entire 22 circles together. The bidders can bid for any circle/some circles/all circles.

But the existing operators have not paid any amount for the spectrum allotted to them before 2001 and only Rs 1650 crore for all the circles for the spectrum allotted to them in 2001 or there after. On the other hand, the new operators who will buy spectrum in the auction to be held now on 12-11-2012 have to pay minimum Rs 14000 crore for 5 MHz spectrum for all 22 circles. If the existing operators are enjoying spectrum at no cost or nominal cost of Rs 1650 crore, why the new operators should pay Rs 14000 crore for all India license for spectrum? Therefore to remove this discrimination, based on the principle of equality, an issue regarding charging the existing operators for the spectrum held by them for the remaining period of their license on the basis of the price to be determined by the auction to be held on 12-11-2012 has arisen. This issue was examined by the TRAI and it gave its recommendations. These recommendations were considered by DoT and its proposals were sent to the EGoM(Empowered Group of Ministers). The EGoM has considered the proposals sent by DoT  and made some recommendations. These ecommendations of the EGoM were considered by the Cabinet meeting held on 8-11-2012 and certain final decisions were taken.

Decisions of the Cabinet

Following are the decisions of the Cabinet taken in this meeting held on 8-11-2012:

a)      The existing operators need not pay any amount for the spectrum held by them upto 4.4 MHz ( This is 2G, GSM spectrum in 900 and 1800 MHz bands)

b)      For the spectrum held by them over and above this 4.4 MHz, the existing operators have to pay a one time charge, on the basis of the price to be found for the spectrum in the auction to be held from 12-11-2012, on pro-rata basis for the period from 1-1-2013 to till the date of expiry of their existing license period.

c)       For the spectrum held by the existing ooperators over and above 6.2 MHz, a one time charge will be levied from July 2008 to 31-12 2012 at the rate of the price determined for spectrum in 2001 duly increased on the basis of the PLR (Prime Lending Rate) of SBI (State Bank of India).

  (Note: The Government allotted 4.4 MHz spectrum to the existing operators initially, and subsequently allotted more spectrum to them based on increase in the number of subscribers. In some Circles, some operators were given 8 MHz and even 10 MHz spectrum on this basis. Subsequently, in July 2008 the Government decided that the maximum quantity of spectrum to be given along with license should be 6.2 MHz and additional amount has to be collected for the spectrum over and above this 6.2 MHz. But inspite of taking this decision in July 2008, the Government did not collect any thing from the existing operators for the spectrum held by them beyond 6.2 MHz. Moreover, the Government could not allot more than 4.4 MHz quantity of spectrum to some operators who got license in 2001 or there after, since there was no spectrum available.  Hence to bring parity between the existing operators who could not be allotted more than 4.4 MHz spectrum and the existing operators who were allotted more than 4.4 MHz spectrum, the Government took the decision not to charge any amount for the spectrum held by the existing operators  upto 4.4 MHz from 1-1-2013. Since the decision was taken in July 2008 to charge the operators for the spectrum held by them beyond 6.2 MHz, the Cabinet now decided to implement it now for the period July 2008 to 31-12-2012).

d)      The existing operators will be given the option to surrender the spectrum beyond 4.4 MHz if they do not wish to pay this charge.

e)      The existing operators will be allowed equated annual instalments for the balance number of years of license (such that the last instalment is payable not later than 12 calendar months prior to the expiry of the license) considering interest rate @ 9.75% as approved by the Ministry of Finance in the case of new successful bidders for deferred payment. The licensee will also have the option of full upfront payment of one or pre-payment of one or more instalments.

On the issue of charging in the event of spectrum sharing and intra circle merger, the Cabinet tokk the following decisions based on the recommendations of the EGoM:

a)      Sharing of spectrum between the telecom operators will be permitted without any one time spectrum charge, if both operators sharing the spectrum have paid for spectrum beyond 4.4 MHz, as decided above. The license conditions will not be changed for both operators. Both operators have to pay spectrum usage charge (in addition to the one time charge as decided above) at the slab rate applicable for the entire combined spectrum holding.

b)      In the event of merger of two companies on intra circle basis (since license is given separately for each circle, merger of two operators will take place on circle basis. Hence it is  intra circle merger), the resultant merged entity would be required to pay to the Government, the differential between the entry fee and the current auction determined price, on a pro-rata basis for the remaining period of validity of the  license.

These decisions are discriminatory and will destroy BSNL and MTNL

Airtel, Vodafone (at that time with a different name Hutch), Idea, MTNL and BSNL are the old operators who were given license for mobile services prior to 2001. While Airtel, Vodafone and Idea were given licenses in 1994/1995/1996, MTNL was given license in 1997 and BSNL in 2000. The spectrum allotted to them prior to 2001 was almost free without any one time payment, except for the annual payment of spectrum fee (spectrum usage charge) based on revenue earned.

While the 20 years license period of Airtel will expire in 2014, the 20 year license period of MTNL will expire in 2017 and that of BSNL will expire in 2020. Thus while Airtel is having only 2 years of the existing license period remaining, BSNL is having 8 years and MTNL is having 5 years remaining license period. Hence BSNL and MTNL have to pay more amount as one time charge as per the decision of the Cabinet since the amount is based on the remaining period of the current license. While Airtel enjoyed spectrum without any one time payment for 18 years, from 1994 to 2012, MTNL enjoyed it only for 15 years and BSNL omly for 12 years. To bring equality on par with Airtel, BSNL and MTNL should also have been allowed 18 years free spectrum. But this was not done. Hence it is discriminatory.

If the law of equality should strictly prevail, then why the existing operators should be allowed spectrum upto 4.4 MHz without any one time payment while  the new operators who will be bidding for the spectrum in the auction on 12-11-2012 have to pay fully for it without any such free 4.4 MHz spectrum?

When some of the existing operators were not even allotted the 4.4 MHz contracted spectrum, how the other existing operators can be allotted 6.2 MHz spectrum until July 2008? How it can be equality?

Based on the remaining license period being 8 years, BSNL has to pay Rs 6250 crores (it is not there in Delhi and Mumbai which are most profitable)  and based on the remaining license period of 5 years, MTNL  (It is there in Delhi and Mumbai only and nowhere else)has to pay Rs 4640 crore. But inspite of having spectrum in the most profitable Delhi and Mumbai Circles along with other Circles, Airtel has to pay about 4000 crore only. Vodafone and Idea are required to pay Rs 3000 crore and Rs 1700 crore only.

BSNL has to pay this amount of Rs 6250 crore in 7 instalments (Its existing license period will expire in January 2020) along with 9.75% interest. Therefore from 2013 onwards, every year it has to pay more than Rs 1000 crore towards this charge for the spectrum beyond 4.4 MHz. Added to this, it also has to pay the charge for the spectrum it is holding beyond 6.2 MHz for the period July 2008 to December 2012.

BSNL and MTNL are facing losses for the last three years and they are not in a position to pay this amount. The losses faced by them are on account of maintaining landlines which are commercially loss making, but socially required. Hence it is the duty of the Government to compensate them for these losses. But the Government stopped such compensation coming under the pressure of the private operators and the Indo-American CEO Forum (Joint Forum of the big capitalists of India and America). Thus Government is intentionally causing losses to BSNL and MTNL. Now it is imposing more burden on them in the name of one time charge for the spectrum. Such a burden on them will lead to their destruction. They will become sick and unviable.

The BSNL and MTNL managements requested the DoT to exempt BSNL and MTNL from this payment. The DoT recommended for such exemption. The EGoM also recommended for the same. But the Cabinet did not agree and imposed the payment.

In case BSNL and MTNL do not want to pay this amount, as per the decision of the Cabinet, they have to surrender the spectrum they are having beyond 4.4 MHz. BSNL is having 10 MHz spectrum in AP, Assam, Bihar, HP, Haryana, Karnataka, Kerala, Kolkata, Maharashtra, MP, NE, Orissa, UP (E), and  UP(W). It is having 8 MHz spectrum in Chennai, J&K, Rajsthan,Tamilnadu (Subsequently TN and Chennai were allotted 2 MHz more, together)  and West Bengal. It is having 6.2 MHz spectrum in Punjab and 7.4 MHz in Gujarat. Therefore in case it opts not to pay this one time charge, the BSNL has to surrender the spectrum it is having in all these circles, over and above the 4.4 MHz. When more and more spectrum is required in view of the increasing importance of data services, surrendering the spectrum already it is having will not be good for BSNL. At the same time it cannot pay this one time charge in view of the  increasing losses imposed on it by the policies of the Government.

Why the Cabinet did not exempt BSNL and MTNL from this payment?

The Cabinet came under the pressure of the private operators who demanded that if BSNL and MTNL are to be exempted from this payment, they also should be exempted. This is an unreasonable demand. The private operators are doing their business only for profit and they do not carry any social responsibilities facing losses. But BSNL and MTNL are PSUs working not only for business and profit, but mainly for carrying out the social responsibilities of the Government. While BSNL and MTNL are maintaining landline network which makes losses necessarily   and providing together 70 per cent of the brioadband connections in the country by utilizing the landline network, no such social responsibility is carried out by the private operators. While BSNL is providing employment to about 3 lakh employees , Airtel is providing employment to only 25,000 employees. Thus the task of providing employment is fulfilled by BSNL more effectively as a social responsibility where as Airteel is not carrying any such social responsibility. While BSNL is providing SC/ST reservations, Airteel is not carrying out this responsibility. While the Government has to depend on BSNL and MTNL for national security in telecom services seector, no such responsibility can be fulfilled by Airtel. Therefore the Government has to allot spectrum to BSNL and MTNL in any band free of cost and also should allow them to provide any service including 4G services on the spectrum they are having, without levying any one time charge for it. In fact BSNL and MTNL are discriminated by  such unjustified imposition of charges for spectrum and denial of compensation for the landlines losses, inspite of carrying out several social responsibilities on behalf of the Government.

Save PSUs BSNL and MTNL to extend services at less cost to the people

The Private Operators are already threatening to increase telecom tariff since they are asked to pay the one time charge for spectrum. The mergers and acquisitions being allowed by the Government will result in reduction in the number of telecom operators leading to the situation where only a few big operators will remain and form a cartel among them to increase the telecom tariffs. It will lead to a high increase in the telecom tariffs. To prevent such monopoly practices, it is necessary that the PSUs BSNL and MTNL should survive and thrive well so that the private operators are restrained from increasing the tariffrs. To allow BSNL and MTNL as viable PSUs for carrying out various social responsibilities of the Government, the Government should allot spectrum in sufficient quantity in all bands free of cost to BSNL and MTNL, along with permitting them free of cost, to provide any service including 4 G service on any band of the spectrum. Besides this, the Goveernment should compensate BSNL and MTNL for the losses incurred by them on landlines.  The officers and employees in BSNL and MTNL and the progressive forces in the country should fight for this and change the policies of the Government in favour of the PSUs.


Monday, November 5, 2012

Management’s plan for making BSNL viable-is it for fragmentation of BSNL into several entities?

As per the reports in the news papers, the CMD BSNL has submitted the following proposals to the Telecom Minister Sri Kapil Sibal for increasing the revenue of the BSNL, which is in losses since last 3 years:

  1. The CDMA net work  of BSNL will be given on lease to other operators. BSNL is having CDMA network throughout the country except in Delhi and Mumbai. On this network mobile services are being provided, utilizing CDMA technology and utilizing the 800 MHz band spectrum. GSM 2G services are more popular and provided on 900 MHz and 1800 MHz spectrum bands utilizing GSM technology, and most of the customers of BSNL are GSM subscribers only. The CDMA services subscribers with BSNL are about 50 lakhs only whereas the GSM subscribers are more than 10 crores. The CDMA network can be utilised by the operator taking it on lase either for providing wireless data services as is being done in case of Tata Photon or it can be used to provide full pledged services including voice and data by upgrading the network with additional investments. This is possible since the new telecom policy 2012 allows spectrum sharing. A consultant will be appointed by BSNL to suggest it a model for leasing out its CDMA network. The Consultant for this purpose will be appointed by January 2013. It is estimated that such leasing of its CDMA network will yield a revenue of Rs 250 crore.
  2. The Cell towers of BSNL will be hived off to form a separate subsidiary Company, so that its towers can be given on lease to other operators. The Consultant for suggesting the road map for the formation of this Tower Company will be appointed by the end of November 2012. BSNL is having 70,000 towers throughout the country and it is already having tower sharing agreements   with the private operators. It is expected that sharing of the excess tower capacity and other excess capacity will yield a revenue of Rs 1600 crore over 5 years.
  3. The real estate holdings of BSNL will be monetised.  A Consultant will be appointed by BSNL to evaluate its real estate properties, to assess the rental potential of its built up spaces, to suggest how to develop its vacant lands and to suggest disposing off its assets. The Consultant will be appointed by November 15th, 2012. BSNL is having 4400 hectares of land in 3500 towns throughout the country. BSNL is hiving off this 4400 hectares of land. It is said that the land bank of BSNL will be utilized for building call centers, software parks e, and for such other activities related to telecom.  This move of BSNL for utilizing its real estate comes afterthe suggestion of the Vijay Kelkar Committee for utilizing the lands available with Government Departments to generate huge revenue. As per estimation, BSNL will get revenue of Rs 250 crore upfront value on its real estate assets in 2013-14 and a rental value of Rs 250 crore every year starting from 2016-17 onwards.
  4. BSNL will utilize its telecom factories to set up electronic equipment manufacturing facilities in partnership with various manufacturers and it will generate revenue of Rs 500 crore.
  5. BSNL will utilize its training centers to impart training in telecom skills to various sections of the population and it will generate a revenue of Rs 200 crore over a period of 5 years.
  6. It will provide wi-fi based high speed internet services at public places like Malls, airports, hospitals, IT parks etc which will generate a revenue of Rs 25 crore in each zone ( there are 4 zones in BSNL) in the first year and Rs 50 crore in each zone from second year onwards.
  7. It will connect 15 lakh schools in the country with high speed internet and it will charge Rs 5000 per year per connection and it will yield a revenue of Rs 750 crore per year.
It is estimated that all these measures together will yield a total revenue of Rs 8000 crore to BSNL during next 5 years.

But the issue is why BSNL is unable to utilize its CDMA network to provide data services and other services when others having CDMA network are providing these services? Also if CDMA network is handed over to some body, if the cell towers are handed over to a separate subsidiary Company of BSNL , and  If the BSNL’s land assets are hived off as another subsidiary, what will be the shape of BSNL in future? If other operators are allowed to share the network of BSNL and provide services in their name without even having their own network, is it not allowing the competitor to use the network of BSNL? It appears that in the name of increasing the revenue, BSNL is proposed to be fragmented into several entities, thus weakening it more.