Telecom Secy hints spectrum auction may be pushed to Oct 1

The upcoming spectrum auction, scheduled to start on September 29, may be pushed back by a few days, Telecom Secretary JS Deepak has hinted.In an exclusive interview with CNBC-TV18's Shereen Bhan, Deepak talked about a number of key issues with respect to the spectrum issues and also took questions on issues such as the need for amendment to the TRAI Act, right-of-way policy for telecom infrastructure and the VSNL land issue among others.Below is the verbatim transcript of JS Deepak's interview to Shereen Bhan on CNBC-TV18.Q: Let me start by start by asking you about the big spectrum sales, you had your pre-bid conference over the weekend. What were the kind of questions that were asked of the government with regards to the spectrum auction and the specific clarification that industry has sought on the notice inviting applications (NIA)?A: Well, the NIA did showcase all the rules for the oncoming spectrum auctions and there was a lot of interest and we had representatives from almost all the telecom service providers and the questions were basically on the amount of spectrum that was being put to auction, the date of auction itself, the speed of the rounds, how long would be each round and what would be the gap between the rounds and things of that sort.Q: May I ask you very quickly to elaborate for us if there is any changes as far as the spectrum auction timeline is concerned and also if you could very quickly give us the highlights in terms of the speed of auction and address the clarifications that industry has sought from you?A: This set of spectrum auctions are remarkable and the fact that the amount of spectrum that has been put to auction is large as well as it is going to be in 7 bands simultaneously. The one question which came from a number of prospective bidders was that considering the complexities that we would be having almost 126 possible ways that a person could bid. The time for each round of the spectrum auction that is something which prospective bidders wanted to know.Looking at the variety and the volume of spectrum being put on sale, the question was whether they would have enough time to understand and be able to bid online for the auctions.Q: What is the exact date then, that we would see the spectrum auction taking off, I believe there was a demand that you could perhaps push it by couple of days?A: Yes, the notice inviting applications refers to September 29 is the date when the auction would start. Bidders felt for two reasons, one is that they wanted a longer period of time between the mock auction, which is scheduled for September 27 and the beginning of actual auctions and the second thing is some of them felt that the auspicious part of the Hindu year begins on October 1 and they have requested that if the bids could start after that.Q: Have you decided to give into their demands. Are we going to see pushback the spectrum auction to coincide with the auspicious date of October 1?A: The last date for sending in request for clarifications is the August 19 and we will come out with the final NIA by the September 29, so there is still time to consider in, but my personal view is that if there is anything which gives comfort to the bidders and helps them or enable them to bid aggressively, we are willing to look at it.Q: Since you were talking about participation and this is a concern that we have discussed earlier, on the response that is expected to be more muted. What is the sense that you now get after the pre-bid conference. Are you anywhere going to be able to achieve that kind of 5.67 lakh crore number that the government was hoping for?A: The volume of spectrum that we are putting to auction is about 2,300 megahertz (MHz), so this is an unprecedented amount of spectrum being sold. In fact, the remarkable feature of this auction is the volume of spectrum in the sense that telecom companies have been having this grouse that they never had enough spectrum, there has been spectrum fragmentation and this comes in their way of providing quality of services, so this amount of spectrum available in 7 bands give them not only a volume, but also a variety whether they want 2G, 3G, 4G they can bid and acquire in this auction. So that is a great opportunity I think for the Indian telecom sector as a whole.Q: Because most people seem to believe that the response is likely to be moderate and in fact I will just read out one report and this comes in from ICRA, which expects modest participations. They believe the auction is likely to fetch between Rs 60,000-65,000 crore, which is about one-tenth of the entire value of spectrum up for auction, as I said that is just one report, there are others that seems to believe that the participation is likely to be muted on account of several reasons, one of course is the financial position of telecom operators and the other is that there is no risk of licence expiry, so that overhang is not there either at this point in time. How would you respond to that?A: See of the total amount of spectrum value which is about Rs 5.5 lakh crore, about 4 lakh crore is at reserve price the 700 MHz spectrum. Now this is the best spectrum for data for indoor use, for 4G and therefore obviously it is highly priced. This is what I call beaten gold and anyone who wants 700 MHz will save a great deal, almost 70 percent on infrastructure costs, because they have to set up so many fewer towers to take services to the same number of people, so it is expensive but it is beaten gold and if you want the best you have to pay for it.Q: I want to address 700 MHz issue, because of the Rs 5.67 lakh crore, 70 percent is expected to coming from that 700 MHz which you are calling beaten gold, but you are also acknowledging the fact that Rs 11,485 crore per MHz it is expensive and this is the concerns that industry has voiced, but do you believe that they now come to terms with this pricing and we will in fact see aggressive bidding here?A: The Telecom Regulatory Authority of India (TRAI) has done a detailed consultation with all stakeholders, experts, academicians, telecom service providers and it has recommended this is the price for spectrum, so looking at it as very good quality spectrum.This is the price that they have fixed, but keeping 700 MHz spectrum aside for a moment, there is an Rs 150,000 crore worth of other spectrum, which is also being auctioned. There was Rs 125,000 crore which was in the TRAI recommendation, in addition to the process of harmonisation of spectrum in the 1800 and the 800 MHz bands. We have been able to get Rs 27,000 crore worth more of spectrum, which we are going to put to auction, so this itself is a huge amount of Rs 150,000 crore at reserve price, which should find bidders as well.Q: Is there a plan B. I know that you expect participation to be strong but if that were not to be the case, is there a plan B for the unused or the un-auctioned spectrum?A: Auction commences in September-October, let us wait and watch. Maybe you would be surprised at the demand that we may see in the auctions.Q: I am not suggesting that we won't but I am saying that if there is the possibility that there is going to be unsold spectrum, is there a plan B, will we see another auction this year itself or perhaps early next year?A: Most auctions that we have done have seen unsold box of spectrum, so we will take a call on that as and when we reach the stage of decision making.Q: Would that also then mean a reduction as far as the reserve price is concerned?A: It is premature to talk of what would be the reserve price for the next auctions when we are still some way off from the present auction. So, I would suggest we wait and watch and see what the response is and how it goes._PAGEBREAK_ Q: Public spats between telcos or between telcos and the regulator is not new to the sector. Sector has seen many of these public spats in the past. What is worrying you about what is going on today?A: Telecom sector is a very vibrant and a fiercely competitive sector. So, we have these kind of dynamics in the family. I don't think there is anything to worry about it, these kind of things happen when there are changes happening or expected. So, I don't think there is any reason to worry about or to be concerned about this. This is normal kind of things which happen when new operators come in, when consolidation takes place, when there are changes, sometimes they lead to the press playing a very important part in conveying these things.Q: As far as the termination charge itself is concerned, where does the department of telecommunication (DoT) stand on the issue because it is only a consultation paper that the Trai has put out at this point in time seeking a review of the termination or the interconnect user charge (IUC) currently at 14 paise. Do you believe that this has been blown out of proportion because it is a consultation paper where the Trai has invited comments?A: Absolutely, it is a consultation paper. Various stakeholders are invited and are welcome to give their comments and I am sure Trai will look at various views which are expressed in the comments and the inputs that are made to it.Q: Is there a rationale you believe at this point in time for the IUC to be brought down to zero which is what the Trai is seeking comments on? A: The termination charge is something which is in the remit of Trai. There is a consultation paper that has been put out by the regulator. The industry or the eco-system as well as the stakeholders have not responded to it. So, it would not be proper for me to give my view even if I have any on this issue. We should wait for the responses and the process going forward.Q: On the VSNL surplus land sale, can you explain to us where that process currently stands and how soon we could perhaps see forward momentum building on this issue which has been long pending?A: When VSNL was privatised way back in 2001 the land was hived off from it but for various technical reasons it remained with Tata Communications Limited which was the privatised company. There was this problem of the company having to pay capital gains tax if the land was to be transferred to a government company which actually had interest in the land.In the last parliament session the department of revenue has made an amendment to the Income Tax Act which will ensure that land in which the interest of government was there as part of the process of disinvestment of VSNL will come back to us to be used for public purposes. So, something which had been pending for almost 15 years is being sorted out and land which was ours but which was in the possession of Tata Communication Limited because of this problem of capital gains is now being sorted out I believe. Q: How soon will we actually see this process move forward? You believe that the issue has been sorted out but in terms of bringing it to its conclusion, what is the kind of timeline that you are looking at?A: We are hoping that once we get information that the Income Tax Act has been amended and the enabling provision for transferring this land to us without payment of capital gains is in place, we will work on it fast and we hope that we should be able to get it back in this financial year 2016-2017 itself. It is about 740 acres of land in four cities, so it is a humongous task to get it transferred on paper etc but we are working to try to accomplish it in this financial year itself.Q: If I could talk to you about something that the regulator has been asking for a while in the context also of the call drop order, whether or not we are likely to see an amendment to the TRAI Act itself to give the regulator more teeth, where do things currently stand, has the DoT taken a position on this matter, can we expect forward movement?A: There are number of issues related to the Trai which would need amendments in the Trai Act. We are processing those including the latest request from Trai. We should be having a view of government in a short while. The government should have a view on those in the next few weeks or so.Q: A review has been conducted of the request that the Trai has sent. Do you believe that there is a need for an amendment to the TRAI Act to give the Trai more powers specially when it comes to issues like quality of service?A: The quality of service is an issue which believe is extremely important. There are number of things which affect quality of service. One of them is spectrum. The availability of adequate amounts of spectrum which is a problem we hope to solve with these upcoming auctions. There are various other issues also and we are looking at it in a wholistic way to see what is the way to improve quality of services so that the customer gets what is his due.There are number of issues related to the amendment of the Trai Act which are pending for almost 7-8 years and all of them are being looked at and the government should be in a position to take a decision very shortly.Q: The TRAI amendment is something that you are considering. I also want to talk to you about the right of way policy, because I believe that this is expected to be notified shortly. Is that accurate information and what will this means in terms of the sector?A: Of all the reforms that we have been pursuing for the last few months, right of way is one such important reform. Under the Indian Telegraph Act, we are seeking to bring out right of way rules which would enable telecom service providers to set up towers as well as laying optical fibre much more easily.They would get the process of giving permissions for right of way through government property, through the property of municipal corporations and the like would be streamlined, would be made transparent and would be made time bound. That is what the objective of right of way rule is, they are in the process of vetting and final approval and we hope that very shortly, we would be able to formulate the right of way rules, which would make it simpler and faster and more certain for industry to set up infrastructure.This is in addition to the e-KYC policy that we have notified today, wherein the process of customer acquisition has been made online, automated and simple in the sense that it is now based on the Aadhaar based identification of a prospective customer. So there harmonisation was the first, e-KYC, the virtual network operator and the right of way rules these are four important pillars which would make life easier for telecom service providers and improve the ease of doing business in this sector.Q: The government is looking at strategic disinvestment plan. It also looking at what it should do as far as public sector undertakings are concerned, from the PSUs that fall under your ministry anything that we could expect by way of strategic disinvestment?A: We have number of PSUs, the biggest of course is BSNL and which you might be aware is on amend. The operating results of BSNL have been improving and we hope that soon it will reach a stage, where it will be able to generate surpluses for capital expenditure as well.As far as disinvestment is concerned, the Department of Telecom not at present looking at any plan for disinvestment of any of our PSU, but this is of course something which is on the remit of the Ministry of Finance.Q: A recommendation that has been made for companies like ITI to provide them with defence PSU status to perhaps get them more orders, is any forward movement expected on that front?A: ITI is the oldest public sector undertaking in the country. It has had problems because it was setup to produce landline phone instruments and with the change in the eco-system in the telecom sector it has been getting government support. We are at present implementing a package for ITI under which it gets a reservation order for all orders placed by BSNL, MTNL as well as Bharat Broadband Limited (BBNL) which is implementing the Bharat Net project. So, they have a 30 percent reservation of order so that they get adequate orders to execute and can get enough margins to be able to pay salaries an incur essential expenditure. So, this provision is already there.There is a recommendation of the parliamentary committee for making it a defence PSU and we will be in the days to come looking at it.Q: How soon can we expect a decision on that front of converting ITI into a defence PSU?A: It would not be possible for me, I have not yet seen the recommendations, it is still I believe on its way to us. Once we have a look at it we will examine it and see the pros and cons and then the government will take a decision.Q: How confident do you feel today as you proceed towards the auctions?A: The spectrum auction rules have certain features which are very industry friendly. Not only the amount of spectrum which I have mentioned, the variety of spectrum which has been talked about, we have all kinds of spectrum available. Also the rules make it very attractive for industry. The government has committed for the first time that we will assign spectrum within a month of the money being paid. This process often took 4-6 months. The interest rate on the instalments which companies have to pay is less this time than it was last time and the chances of getting chunks of spectrum, chunks of contiguous spectrum through the auction process is much larger in the design. So, all of this should make it very worthwhile for telecom service providers to bid and win large chunks of spectrum and we hope that this will not only solve the problems but will also help them to rollout different new technologies and different licence service areas.