Hanging up

Confusion over policy,shifting deadlines 2G auction couldnt get a worse advertisement

Confusion over policy,shifting deadlines 2G auction couldnt get a worse advertisement

Norwegian telecom major Telenor on Monday announced it was writing off its assets in India worth over 680 million claiming that uncertainty has increased significantly in the wake of the Supreme Courts ruling in February scrapping its spectrum licences and the recent TRAI recommendations on re-auction of 2G spectrum. Telenor,along with Russian firm Sistema and UAEs Etisalat,are among global operators who have taken a hit on their balance sheets due to their exposure to India. Australias Telstra and Swedens TeliaSonera AB are said to have announced they wont participate in the auction. But alarm bells are still not ringing loud enough. Surprising,considering that the telecom sector is one of the few genuine success stories of the opening up of the Indian economy with the surge in subscriber base numbers and teledensity. There is no denying that the telecom boom largely happened thanks to a stable policy environment that spurred competition in private sector players,which translated into competitive tariffs for consumers so that the benefits of telephony trickled right to the bottom of the pyramid. All this could now come undone.

Caught between courts,the regulator and the government,the telecom sector doesnt know how to look forward. Starting with the February 2 order of the apex court which scrapped all 122 new licences issued during former Telecom Minister A. Rajas tenure and called for fresh auctions,there is growing uncertainty. For instance,on the time-frame for the validity of the licences. The apex court originally fixed June 2 as the deadline when all the 2G licences,issued in 2008,would stand quashed. The government then sought 400 days to complete the process of fresh auctioning. The court shot this down and gave the government just over two months more; it has set August 31 as the deadline for conducting the auction and granting licences with existing ones valid until September 7.

On pricing,there is confusion,too. TRAI has come out with proposals for the 2G spectrum auctions that entail a 13-fold increase in the base price. High reserve prices and spectrum sold in small tranches could ensure the playing field tilts in favour of incumbents and against new entrants. Now to add to the confusion,the Telecom Commission the highest policy-making body in the sector has said that it plans to seek clarity from TRAI on key recommendations. With the retrospective IT Act amendments on Vodafone threatening to further queer the pitch,there is a real risk of frittering away the gains that could have been achieved with cheap connectivity in what was once Indias shining sunrise sector.