Millennium Post

The year of the telecom industry

No Indian economic sector hogged the limelight like the telecom industry in 2012, even as the swelling number of subscribers continued its upward mobility.

The year saw it all - the Supreme Court cancelling 122 licences, failed spectrum auction, disputes over interconnect charges, spread of 3G networks, and penetration of smartphones that affected the industry.

Mukesh Ambani re-entered the scene with Reliance Industries announcing launching 4G broadband services through subsidiary Infotel that analysts said could have a disruptive effect in pricing and lead to a consolidation in the entire telecom space. And the country’s largest operator Bharti Airtel launched 4G service in Kolkata and listed its tower business, Bharti Infratel. The cancellation of 122 operators’ licences by the Supreme Court at the start of the year not just impacted adversely the industry but also raised the question of judicial intervention in executive decision-making. The apex court ruling in February not only sent shock waves in telecom, but also other sectors such as coal, where, similar to spectrum, mines were allotted and not auctioned.

Foreign firms like Abu Dhabi’s Etisalat, which later announced its exit from India, Russia’s Sistema and Norways’ Telenor that had entered the world’s second largest cellular market to ride on the India growth story found themselves in a nightmarish situation that still continues. The governments in these countries threatened to take the Indian government to court under the Bilateral Investment Promotion and Protection Agreement (BIPA). The Supreme Court kept its pressure on the government to meet its guidelines of the auctioning realised spectrum within four months’ time. But an inter-ministerial group could not agree on certain basic modalities of reserve price and auction process, creating confusion and delays.

In the meantime, the industry regulator, Telecom Regulatory Authority of India (TRAI), recommended a reserve price of Rs.18,000 crore from the sale of the realised spectrum. The move was opposed tooth and nail by the industry. The industry association Cellular Operators Association of India (COAI) said that the reserve price would raise per minute tariffs by 37 paise to 49 paise. The government finally toned down the original figure to Rs.14,000 crore.

Meanwhile, an overburdened government whose fiscal consolidation targets are going haywire saw an opportunity to recapitalise. Finance Minister P Chidambaram said the government expected a ‘substantial’ amount from the 2G spectrum auction.

This was not to be, as the auction garnered poor response and only managed a meagre Rs.9,407.64 crore from a minimum expected Rs.28,000 crore target in the process which lasted barely two days in mid-November.

The government said it will hold more auction to sell unsold 900 and 1800 mega hertz (Mhz). It also reduced the reserve price of 1800 Mhz spectrum for four circles by 30 per cent to attract more bids. The silver lining was the continued growth of subscriber number in the sector and rollout of 3G and 4G services.
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