Govt, TRAI should map solutions for telecom sector: Experts

Excerpts from India Business Hour on CNBC-TV18 Watch the full show »

With the Supreme Court's order to cancel 2G licenses still fresh in their mind, experts tell CNBC-TV18 that the government and the telecom regulatory authority of India (TRAI) should come out with a roadmap for the telecom industry as a solution to the problems it is facing.

"The four months time given definitely seems quite tight, but the auction should have a balanced approach," said Jaideep Ghosh from KPMG. According to him, it should not only meet the needs of the government and the industry, but the consumers and other stakeholders are well.

Senior Advocate of the Supreme Court Gopal Jain agrees that four months is a very short time span, but points out that this might be an outer period. "The idea is to think quickly and get on top of the situation fast," he explained.

Speaking about the possibility of a review to the SC ruling, Jain accepts that it is very rare and that it has very little scope. "When the Supreme Court gives a judgment, it's final," he explained. Therefore, he believes it is better to look at things with better clarity instead of with a timeframe point of view.

Below is an edited transcript of his interview. Also watch the accompanying video.

Q: We saw that crucial meeting take place at the Prime Ministers residence over the weekend attended by the likes of Kapil Sibal, Pranab Mukherjee and just about every other top cabinet minister. You are also now picking up exclusively that perhaps we could see change at the TRAI itself with a new Chairman being put in place in May?

Zarabi: The weekend meeting saw quite a bit hand wringing, if we may put it that way, with regard to the Supreme Court judgment, but there was no finality as to what is in terms of a review possibly because remember that's been spoken about for quite some time now. The government seems to have taken on board the fact that this auction, as has been directed by the Supreme Court, needs to be done in four months time.

The second part really is that the first meeting of the search and selection panel which is headed by cabinet secretary Ajit Kumar Seth is slated for tomorrow. This is going to select a new TRAI Chairperson because Dr Sarma's three year tenure comes to an end in May 2012. Effectively, the timeline for the implementation of the Supreme Court order will virtually coincide with a new TRAI Chairman coming in. So it's not to imply that the current TRAI wont be able to do it, but that's one more fresh angle or twist to the tale that's been thrown up today.

Q: Uninor is the only company that's put in its recommendations to the TRAI so far. While ofcourse every company is trying to argue the best case scenario for itself, does Uninor's recommendations make sense to your mind?

Ghosh: The fact that Uninor has come out publically in terms of their preference for this kind of an auction model clearly shows that their intent is to stay in business and revive and grow this particular business in India which is a good sign. In terms of what may happen and possible solutions, I think the auction and the license allocation and spectrum allocation has to be a balance kind of an approach. It should meet various stake holders' requirements, impacted operators, fresh players who may want to enter this particular market at this point of time, the incumbent telecom operators, government's requirements and of course the consumer needs.

In that context, I think it's too early to say whether this particular recommendation is an optimum one but definitely something which would help Uninor and other impacted operators to probably revive their business in a easier way vis-à-vis going for all out auctions. But I think finally we need to see how the rules kind of shape up.

Q: What do you make of this back and forth with regards to whether telcos should challenge the Supreme Court order, not challenge the Supreme Court order or go back to the Supreme Court say you find answers to this problem for us?

Jain: We have got to look at the issue in two different parts. One is that usually when the Supreme Court gives a judgment, it's final and review has a very limited scope and if the review is dismissed you can theoretically go to a curative petition, but like I said it happens in the rarest of rare cases.

The second is that post the judgment now the government and the TRAI have to come up with the roadmap and the architecture going forward. So really the focus has to be on that process because you have got to map the ecosystem. You have got to look at all the different stakeholders and you have to find a solution and a movement away from the havoc and dislocation that we have seen.

Q: Is four months a good enough time period to be able to find that solution?

Jain: We have to look at it like this that four month is let's say a outer period because the court had said that the licenses, which are cancelled that part of the order will take effect four months from now. So obviously given the past history, this seems to be a very short timeframe but it equally can show that there is degree of urgency which is required, and the question is therefore to have greater clarity on what you want to do rather than look at it from a timeframe point of view. So idea is to think quickly get on top of situation fast.

Q: Since we are trying to put together an agenda that could provide some solutions to the current impasse, what would your recommendation be?

Jain: I would look at this like this. Let's look at the broad stakeholders. You would have people whose licenses are cancelled, some of them had rolled out and had investments on the ground, then you have lenders, you have tower companies, you have other existing telecom operators who are maybe interested in the spectrum and maybe some new operators. The real reason why the court said there should be an auction was they felt the market determent price had not been paid.

So if the auction process fetches the maximum price and the loss to the exchequer is dealt with, we have got to build in a provision where those who had licenses, who had rolled out and put substantial capital expenditure on the ground are willing to match that price, then really they should be permitted to continue so that you don't have to reinvent the wheel from scratch. That way, lenders will also be assured that their money is safe, tower companies will be safe, consumers will not be affected and overall it sends a positive message that investments on the ground and other investments are also protected.

So I think one has to look at all these constituents holistically rather than only look at those whose licenses have been cancelled.

Q: What are your views?

Ghosh: I think four months quite tight. Possibly yes, just to frame the auction guidelines, yes. But let us not forget that the entire National Telecom Policy 2011 which was released at the end of 2011 is not yet finalized. So when new operators, impacted operators, fresh players and incumbents bid for spectrum, it's important to also understand what is going to come in the NPT.

So I would think that unless the national telecom policy comes into being in the next 3 or 4 months, it's going to be fairly uncertain in terms of the bidders, in terms of what they are going to bid and what would be the rules. For example exit policy or amend the guidelines those are also not very clear at this point of time. So I think solution has to be kind of be more holistic, in terms of not only the unified licensing regime and the auction framework but also the overall triad of policies as its being said. At the minimum, the national telecom policy should be formulated very quickly so that it's a kind of holistic solution for the entire ecosystem, the operators, tower companies so on and so forth.