Nov 1, 2008

Business - India;Q&A A.Raja;Union Minister for Communications and Information Technology


Union Minister for Communications and Information Technology A. Raja says he is seeking to ensure a level playing field in the telecommunications sector while taking care of the interests of Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL), the public sector entities. In an interview to The Hindu in New Delhi, he attributes the controversies generated by his Ministry’s decisions to his efforts to break the cartel of established telecom operators. There has been no departure from the National Telecom Policy 1999 in the grant of Unified Access Service Licence or allocation of spectrum to new operators, he says.

Your Ministry allocated spectrum to new operators. There seems to be a fair amount of controversy surrounding this decision…

If the spectrum were shared with the existing operators, there would have been no controversy. I tried to break the cartel. I am the first Minister who has tried to break the cartel.

Even though the Cabinet had specified that operators can be given only 6.2 MHz, they [private mobile operators] were given more than this — till I assumed office. But this was not made out to be a controversy. It would have been smart of me to follow the existing system. The existing system involved giving spectrum to the existing players once they fulfilled some conditions. The Ministry withheld spectrum [allocation] and waited for the existing operators to fulfil the conditions. Is this the way to treat a scarce resource like the spectrum? The loss on account of this would run to several thousand crores [of rupees]. Imagine how much revenue the Government of India would have got if more operators were allowed in earlier.

There is a feeling that you are against the existing operators…

I am not against anyone. The existing operators do not want competition. There are four or five operators in all circles. I added another four or five. This will only mean more people will benefit. The reach will be much larger. The new operators will go to the rural and semi-urban areas. I have allowed telecom companies to share towers. Wait and watch rural teledensity grow in the next few years. Then you will say that my actions were right. I am presiding over a silent revolution in the telecom sector.

We are using subscriber base as a criterion to ensure spectrum efficiency and optimum usage. When I made a presentation on this at a conference in Malaysia, there was all-round appreciation. Many who spoke there said that India’s model should be adopted. Because many of the countries there were not able to force their operators to go to the rural areas.

The charge is also that once the new operators were given the UAS Licence and allotted spectrum, they offloaded a major part of their stake and made huge profits. And that the Ministry did nothing to stop this…

You have to look at my mandate. My Ministry needs to look at the [application] papers, see when the money was paid, make sure if the applicant has fulfilled all the obligations listed. You have to realise that for 2G spectrum we have followed the first-come first- served policy as per the National Telecom Policy 1999. NTP 99 recommended the first-come first-served policy because of the failure of the spectrum auction [exercise] in 1994.

All the new operators who have been given licence and allocated spectrum have fulfilled each of these conditions. The conditions stipulate that they have to complete their roll-out within a specified period of time. If they do not complete, then I can take action. The other criterion is that they cannot sell off within a period of five years.

But if they find an investor willing to pick up a stake, there is nothing much I can do. It is for the Finance Ministry to look into this. What I find strange is that some people are talking about loss to the government based on stock market fluctuations. Am I responsible for stocks rising or falling? It is true that some companies have made a windfall. I have been talking to Mr. Chidambaram [Union Finance Minister] on this. I will again meet him next week for a discussion. I have told him that from my end I am willing to impose any conditions to ensure that companies do not make undue profits.

How much spectrum did you allot since July 2007? How much had been allotted earlier? And who were given this?

All circles combined, I have allocated 463.8 MHz from July 2007. Before the UPA Government came to power, 525.6 MHz was allotted. From June 2004 to July 2007, 172.6 MHz was allotted.

I have followed all procedures while allotting spectrum for 2G services. I have not allotted over the Cabinet-prescribed limit of 6.2 MHz to a single operator apart from BSNL and MTNL, which are state-owned entities. Any private operator who is holding more spectrum than he can hold as per the Cabinet decision, was allotted the spectrum before my time.

The other question that needs clarification is the allocation of 2G spectrum on first-come first-served basis. You have explained that this is because auctions failed in 1994. Was there any loss in revenue because you allocated 2G instead of auctioning it?

This is the other point I want to clarify. I am of the firm view that the allocation route is superior to the auction route in the case of 2G for three reasons. One, the revenue is steady and increasing exponentially each year. Two, there is a social obligation component in 2G and this can be best served only if the government does not do an outright sale of the spectrum. The world over, 2G is used as a means by governments to improve teledensity. If I auction, I cannot have any control over it. Three, as per NTP 99 we should not auction: it spoke of improving rural teledensity at affordable cost.

I talked about revenue growth. Let me explain. The total amount collected in 2004-05 by way of licence fee and spectrum charges from all operators was Rs.7,953.13 crore. In 2006-07, this grew to Rs.10,747.42 crore. The next financial year, 2007-08, this more than doubled and stood at Rs.24,381.88 crore. In the first quarter of this year, we have received Rs.4,083.05 crore. In all, from 2004-05 to now — the first quarter of 2008-09 included — we have received a revenue of Rs.55,055.15 crore.

If we had auctioned the 2G spectrum, we would have received a one-time payment. But with this method, we have created a goose that lays golden eggs.

As the number of subscribers grows, we will have even better revenue from 2G operators. We [all the telecom companies] are adding 3 lakh subscribers each day. AGR [Adjusted Gross Revenue] is being collected on the basis of the number of subscribers. This has happened with a low rural teledensity. The number of subscribers now is 300 million. By 2012, the NTP says that the number of subscribers would have grown to 600 million. Every year, we are going to collect about Rs.25,000 crore because of the revenue sharing model we have adopted.

In that case, why cannot you follow the same in the case of 3G spectrum allocations?

As I told you earlier, 2G has a social component. 3G does not have [that]. In very simple terms, 3G is for very quick data transfer and high-end applications. It is not meant for the poor man. It is a value-added service. Also, in most countries, while 2G has been allocated, 3G has been auctioned. That is why the Government of India also wants to use the same methods here. There is a small check, though. This is that 3G cannot stand alone. This has to go with 2G… Of course, 3G will stimulate the economy. It is essential for the economic betterment of the country.

Is there any re-think on the dates for the 3G auction given the current depressed market sentiment?

No. As on date we are going on with the process as scheduled and hope to complete it by January. We do not have a re-think. So far there has been no directions from the Finance Ministry or the Cabinet.

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