Opinion Hung up on discretion

That uncertainty is certainly glaring. There’s a spectrum crunch and the government has awarded new licences,making India break its own world record for the largest number of operators per circle. While a maximum of five operators exist in other countries,we have 14 players! So,of course,a fierce tariff war has begun in a market already characterised by the lowest tariffs in the world — taking its toll on the once highly-valued telecom shares.

Finally,the current policy on mergers and acquisitions in the sector discourages inefficient operators from selling out.

Telecom directly impacts the country’s GDP growth — and,in spite of the global financial crisis and the domestic liquidity crunch,the rock-solid sector continued to outperform others. But what the 500 million-plus subscriber industry now desperately needs is some sort of policy direction — what does the government expect of the industry? — and a relevant policy framework,rather than the unusually complex and often bizarre and irrational decisions initiated by Telecom Minister A. Raja — that not only puzzled industry experts but have now become a subject of ridicule from the courts as well.

Currently Indian mobile operators only provide second-generation (2G) telecom services: mobile phones in India can only deliver basic voice and data services. The government has now announced that it will auction airwaves for third-generation operation (3G spectrum) to private operators. (It had failed to do so for some time.) The 3G spectrum would provide for faster download of data and for video streaming,apart from decongesting the overused networks of the operators which causes call drops. The government has already budgeted Rs 35,000 crore as revenue from the proposed auctions in the current fiscal year.

It takes a lot of effort to build a robust industry from scratch,and it takes even more to derail it; yet,a lot of damage has already been done,and undoubtedly the PM understands this. Appointing Sam Pitroda — credited with bringing about the telecom revolution in this country in the mid-’80s — to ensure that the miserably delayed 3G auctions are held on the scheduled timeline is a step in the right direction. That the move came barely a week after Raja announced his inability to hold the auction in time only shows that faith in Raja is quickly wearing out.

But this isn’t sufficient. To ensure that telecommunications not only continues to grow but is propelled onto its next growth trajectory,the government must now come out with a comprehensive telecom policy,one which holds for at least the next five years,and isn’t meddled with barely a year after being initiated. For instance,barely two years after allotting licences to a few applicants on the pretext of inviting more competition,and after having sought suggestions from the Telecom Regulatory Authority of India (Trai),Raja has now written to the regulator asking if more competition is indeed needed or if operators may be limited. This is only one of the many non-understandable issues plaguing the sector and dragging it down.

Trai is currently working out a consultation paper on mergers and acquisitions,whether 2G spectrum — currently allotted to operators in tranches after they attain particular numbers of subscribers — too should be auctioned instead of the current practice,and whether the number of players should be restricted so that spectrum,which is a scarce resource,can be utilised efficiently.

The stage is all set for a new policy direction. The government must use the opportunity to clean up the sector and ensure that a strong,coherent policy is in place so that no one is able to meddle with it in the future. Competition must be promoted but not at the cost of efficiency. Some tough decisions will have to be taken; but the governemntmust act soon,before it’s too late.

The writer,a special correspondent,covers the telecom sector for The Financial Express,

anandita.mankotia@expressindia.com