Did govt let telecom sector down? Chandrashekhar argues

The tenure of R Chandrashekhar, telecom secretary, has been most eventful. During his tenure, the business and investment sentiment in the sector dipped significantly and many legal dispute pertaining to auction, policy and pricing cropped up. In an interview to CNBC-TV18, he refutes allegations of uncertainty and says that the sector on the other hand has crystallized and become more favourable for investments.

In an interview he highlighted that prior to the Supreme Court judgment of 2012, there was uncertainty with regards to overall policy framework, pricing of spectrum and licensing regime. There are many uncertainties, so fresh investments are getting impacted. However, the scenario changed and resulted in great deal of crystallization into the entire policy environment.
He also added that the cancellation of licenses has impacted investments and investor's confidence for sometime. But, I think uncertainty was the main contributor, so the main challenge was to address that uncertainty and remove all uncertainty with regard to policy, licensing regime and spectrum pricing.
On nation-free roaming issue he said, the policy provision is to remove the burden of paying roaming charges. The whole philosophy of telecom is death of distance. All actions are being worked out to make free roaming a reality. Below is the edited transcript of his interview to CNBC-TV18. Q: Many people feel that from the time you have taken charge policy uncertainty in the sector continues, the customer service has deteriorated and most telecom companies are embroiled in one or the other legal battle. Are you disappointed with where this sector has come today?
A: I am not disappointed with where the sector has come today. Number of challenges related to uncertainty on several aspects and uncertainty about the continuance of a large number of operators were required to be addressed.
Prior to the Supreme Court judgment of 2012, there was uncertainty with regards to overall policy framework, pricing of spectrum and licensing regime. There are many uncertainties, so fresh investments are getting impacted. However, the Supreme Court judgment came in 2012 and then the events subsequent to that in my assessment have resulted in a great deal of crystallisation of the entire policy environment. Around 70-80 percent of the uncertainty has been addressed.  Q: Do you think that licenses shouldn't have been cancelled?
A: I would not like to comment on court's decision. However, it is important to note that decision of the government taken on policy is largely motivated by people good and decision in a court of law are taken on the basis of law and rights of various concerned parties. Therefore, entirely it is not correct to expect that both these perspective would result in an identical outcome. Q: Do you think that it has been the biggest setback for investor confidence for the government’s plans to encourage foreign direct investment. The Supreme Court decided to cancel 122 telecom licenses despite many believe that they had been allocated as per government policy, maybe the Supreme Court found that the implementation was faulty?    
A: I would not like to comment directly or indirectly on the Supreme Court order. The orders of the Supreme Court are binding under the law of the land. Yes, the cancellation of licenses has impacted investments and investor's confidence for sometime.
But, I think uncertainty was the main contributor, so the main challenge was to address that uncertainty and remove all uncertainty with regard to policy, licensing regime and spectrum pricing. That is something which has been pursued and has happened, in fact as far as investors are concerned, now all the conditions are in place for them to make a very cold and quantitative analysis of all investment options that are available. There are no unquantifiable risks or any regulatory uncertainties which they need to worry about. Q: When you say that the government is working towards policy certainty as far as policy making is concerned, after the licenses were cancelled, many experts believe that the government did not fight hard enough for these companies for the telecom sector in the court and it allowed the Supreme Court to enter the policy making domain and say that spectrum henceforth should always be auctioned. How the older telecom companies are also now being asked to pay the market-determined price but at this stage do you feel that the government let the telecom sector down by not fighting hard enough for them?
A: I am not sure if everybody would agree with you that it is the government’s job to fight court cases on behalf of companies or keeping the interest of companies in mind.
_PAGEBREAK_ Q: Maybe not the companies but the telecom sector that is why you allocated a spectrum or licenses at a lower price, why was an auction not conducted so on and so forth probably the government could have fought harder?
A: People may have different opinions in these matters and in many cases the opinions have varied over time as events unfolded. What was a fashionable opinion at one point in time may out limits utility and move on to different perspective later. The fact is that in the course of these proceedings the government did put across its point of view and in fact the entire history of decision making in the sector as well as all the perspectives, which were kept in view when the decisions were taken.
The court has given its ruling and based on that rulings, further decisions was taken. I do believe that post those events now clarity has been achieved on all these fronts, the national telecom policy is in place, the unified licensing regime has been approved and the actual license document is at a fairly advance stage, the regime by which spectrum will be allocated and how it will be priced is pretty much in place. So, a lot of these things are very clear.
This resolution has not been identical to what an investor or an operator may have wanted, but do note that the government does not deal with these issues keeping the perspectives and views is only one set of stakeholders in mind. Public interest is paramount, which in this case is how does the telecom sector serve the needs of people at large, how do you ensure that services become available, how do you ensure that the pricing of the services is. Q: But the services do not seem to improve even in cities like Delhi, we still experience call drops and even post sale customer service there is hardly any company which is providing extremely good services or even the kind of services they were providing two years back. Do you think the sector is fighting for a survival at this stage?
A: As I told you that there has been a period of turbulence and in that period of turbulence there was an impact on investment. There is no two opinions on that. Now, to remedy that situation, the first prerequisite was to address the underlying uncertainties with regard to policy licensing and spectrum management. Everything has been done now. Q: The first stage was to conduct auctions, which failed. The government repeatedly insisted that the auction will be a success, as good research has been done, and when it failed to live up to their expectation, the government washed their hands off it by the saying that the auction was conducted because they were directed by the SC, so the outcome is because of SC order?
A: I don't like to get into that question of whether the auction was a success or a failure. The fact is that a price level was established and paid in the auction which took place in 18 out of 22 circles for GSM. However, price levels for four circles were not established. Similarly, for CDMA, price level was established for eight circles and not established for 14 circles in the auction process. Q: Was the reserve price too high? Should the government re-look at the situation to maybe reduce the reserve price?
A: There are two questions to first whether people who wanted spectrum could get it? Second, if they get the spectrum at whatever price it was available and there would be a viable case of investment and continuing their operations. The answer to both these questions is yes, this is a clear own analysis of the regulator. I do not think that the result should be judged from the point of view of whether the entire spectrum was sold or not.
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Q: What happened to the 900 megahertz band spectrum auction? Now, the government has replied to representations that had been submitted by Bharti Airtel and Vodafone as per the High Court’s order and it is much the same that licenses and spectrum have been dealing and now they will have to buy spectrum at market price and switch to unified licensing regime. However, do you think it is justified if you look at it from a telecom company’s point of view, there was a contract that they entered into and then why should at a later date the terms be changed?
A: I think you are putting across a point of view, which is one view. Q: To get government's point of view?
A: I do not want to enter into the substance of a legal debate and you are at liberty to present the point of view of the companies. These issues will be tested in a court of law and the court would give its findings. But, one must also understand that there are certain rights of both the persons holding spectrum and people wanting to bid for the spectrum. By and large now the upshot of the court’s decision is that the only fair way to establish the price is to set it through an auction. Q: When does 900 megahertz band spectrum auction happen because licenses are coming up for renewal in 2014?
A: A decision of the empowered group of ministers (EGoM ) is being sort on this issue and once it is considered by the EGoM and a decision is taken then action on that will move forward. Q: When is the EGoM likely to meet?
A: Till now no date has been fixed. Q: The government indicated that there will be free roaming. Is it a practical idea? There are companies who do not have spectrum in all the circles and there are others who do have it. From a business point of view, it does not make for a business case for all of them and even from the point of view of customers. Now, if these companies are not able to enter into prudent or cheaper agreements with each other, ultimately the customer suffers. How do you think free roaming is going to be implemented?
A: The Telecom Regulatory Authority of India (TRAI) has released a consultation paper on this issue. TRAI is in process of finalizing its recommendations and then they will give their recommendation. The policy direction has been made clear in the New Telecom Policy (NTP) 2012. I think we should wait and see for the TRAI’s recommendations on what would be the best way of achieving the objective, which is to lead to a situation where you have one country and free roaming.
Indian environment situation is very different from all large countries across the world. So, in some sense it is an artificial situation, which we have in India. Therefore, to address that this policy objective was laid down, we will have to wait and see. Q: How can it be implemented? Can the government do anything to facilitate free roaming?
A: The main intent of the free roaming policy provision was to remove the burden of paying roaming charges. The whole philosophy of telecom is death of distance.
Now, these two ideas are fundamentally contradictory to each other and the way the technology works, there is no inherent or intrinsic reason why it should be present. It is just a mode of pricing the service, which has evolved over the years. It has reached certain equilibrium but there is no reason why it should not have different equilibrium as prevails in other countries. The regulator only needs to figure out the change in equilibrium and how to move in that direction. Q: You mentioned about death of distance. The fact is Sunil Mittal of Bharti Airtel, Asim Ghosh, former MD of Vodafone and Ravi Ruia have been summoned by the 2G trial court. It cannot be denied that they were granted a spectrum under certain policy. Whatever might have been misconduct or the light in which we are seeing the developments now but do you think that at this stage 90 percent of the telecom sector is now embroiled in one spectrum controversy or another is also a by-product of rivalries amongst telecom companies and between different government regimes?
A: If you go into it then there are whole lots of reasons the DoT does not deal with these matters in the nature of the way government business is conducted. However, when we visit events that occurred way back in the past, there would be a lot of factors, which would come into play and this is the case here.