By Shantanu Guha Ray
BERNSTEIN RESEARCH, a global advisory, recently wrote a confidential note to its client on the mess in the telecom market, explaining why India would probably not be a great choice for corporations looking for emerging market exposure to growth in mobile telephony. “India is in a competitive mess, and its regulation grows more capricious and nonsensical by the day. With margins in their low 20s, it risks ending up with a tattered, poor and patchy infrastructure.”
The note was written hours after the Telecom Regulatory Authority of India (TRAI), the country’s regulator, recommended on 11 May this year that operators pay a onetime fee for holding 2G radio spectrum beyond 6.2 MHz based on 3G prices — essentially double dipping on established operators with GSM networks. A little before that, the Indian government had contemplated a move which suggested that Indian mobile operators would not be able to install Chinese-built equipment in their networks — which could drive up the eventual cost of the network.
Little has changed on paper since then. But what is interesting is the growing influence of the Prime Minister’s Office (PMO) that wants to be on top of issues pertaining to the telecom ministry, headed by the controversial A Raja.
The PMO’s directive says all matters related to TRAI’s 11 May recommendation on 2G spectrum allocations will now be referred to an empowered group of ministers (eGOM), which includes the telecom minister and six more heavyweights from the cabinet. Besides Raja, the eGOM has Agriculture Minister Sharad Pawar, Finance Minister Pranab Mukherjee, Deputy Chairman of Planning Commission Montek Singh Ahluwalia, Tourism Minister Ambika Soni, Parliamentary Affairs Minister Prithviraj Singh Chauhan and Law Minister Veerappa Moily. Now it’s going to be the eGOM’s call — having direct industry consultations on issues related to spectrum allocations and charges.
The CVC, the CBI and the CAG are all probing key decisions of the ministry, like allowing two firms, RCom and Tata, to operate on dual technologies
“Transparency is crucial,” BK Syngal, senior principal at Dua Consulting, told TEHELKA. Syngal, former chairman of Videsh Sanchar Nigam Limited (now Tata Communications), said the PMO’s increased involvement will help. Consider the tug-of-war between the PMO and Raja on the issue of giving an extension to Kuldeep Goyal, the current chairman of the state-owned Bharat Sanchar Nigam Limited. Goyal, who was to retire in July 2009, remains at the top of the company whose profits had nose-dived almost 81 percent. At this rate, according to a recent study, the state-run telecom giant could end up retaining only 7 percent market share in three years’ time.
NOW THE PMO — it is reliably learnt — has formed a search committee headed by Cabinet Secretary KM Chandrasekhar, virtually leaving Raja out of the selection process. Other committee members are Shantanu Consul, Secretary, Department of Personnel and Training, PJ Thomas, Secretary, DoT, DPS Seth, former member, TRAI, A Paulraj, WIMAX expert and professor emeritus, Stanford University, and Deepak Parekh, Chairman, HDFC. Parekh and Thomas were also members of the Sam Pitroda Committee that favoured some sweeping changes in BSNL. The committee has been tasked to find a top industry person to be BSNL chairman and another as MD & CEO. Incidentally, among the key recommendations of the Sam Pitroda Committee, that the PM set up in January, was to split the post of CMD into two.
Also, ever since RN Prabhakar retired, the post of Member, TRAI has remained vacant. Top DoT sources have told TEHELKA that Raja is keen on R Mehrotra, a former head of the Tata Teleservices Regulatory Affairs. But the PMO wants Raja to pick one from two in-house people: PK Garg, former DoT wireless adviser or GS Grover, exmember, Services in the Telecom Commission. DoT sources say the chances of Mehrotra winning the race are high. If that happens, he will be the first high-profile executive from the private sector to join the TRAI. That Raja needs to drum up support within the TRAI is evident. He reportedly caused a loss of Rs 60,000 crore by awarding licences to companies at throwaway prices. “It is time the government came clean,” Arun Jaitley, senior leader of the opposition Bharatiya Janata Party, told TEHELKA. The Central Vigilance Commission (CVC) — along with the Central Bureau of Investigation (CBI), Comptroller and Auditor General (CAG) and the Parliamentary Standing Committee — is probing key decisions, like allowing two cellular companies to operate on dual technologies. In 2007 licences were awarded to Reliance Communications (RCoM) and Tata Teleservices that allowed them to operate on both CDMA and GSM platforms. Officials of RCOM and Tata Teleservices declined comment. The only respite for Raja came from the country’s solicitor general who said the telecom ministry was not duty-bound to follow the TRAI’s advice on policy issues. Gopal Subramanium told reporters in New Delhi that the telecom ministry can change the terms and conditions of existing licences and the TRAI’s recommendations. DoT sought Subramanium’s opinion after the regulator insisted on being consulted on the uniform licence fees. TRAI Chairman JS Sarma had recommended linking the price of 2G wireless spectrum to 3G prices after the bids surpassed expectations. Mobile phone operators on the GSM technology platform opposed the TRAI suggestion, while those operating the Code Division Multiple Access (CDMA) technology said it would bring in a level playing field. The slugfest is far from over.