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BW Businessworld

Silver Lining?

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Pranab Mukherjee's resignation from the chairmanship of the EGoM (empowered group of ministers) on telecom to pursue his presidential ambition and Sharad Pawar's recusal as its head has prompted the government to bring in home minister P. Chidambaram as the panel's chairman to resolve the complicated telecom tangle.

Only, the Chidambaram-led EGoM isn't going to be as ‘empowered' as the one led by Pranab. Key decisions related to spectrum pricing need to be referred to the Union Cabinet for its stamp of approval. The five meetings conducted by the Pranab-led EGoM over three months have come to a nought as the team gets down to discussing the agenda.

Its other members include Planning Commission deputy chairman Montek Singh Ahluwalia, defence minister A.K. Antony, communications minister Kapil Sibal and information & broadcasting minister Ambika Soni.

Reconstituting of the EGoM implies that operators such as Uninor and MTS, whose licences were among the 122 cancelled by the Supreme Court, will have to wait endlessly until the new EGoM resolves what  should be the base price for spectrum in an auction. The panel will also take a call on what —if any — should be the one-time fee existing telecom service providers need to pay for the balance of their 20-year licences. Then they move to the technology- agnostic, one-country-one-licence-wielding New Telecom Policy, 2012.

P. Chidambaram, He has been chosen to head the new EGoM on spectrum (Bloomberg)

Everything is on hold until the EGoM takes a decision on the Cabinet note put up by the DoT recommending a one-time spectrum fee on all operators for the remaining period of their licences. This will provide a level playing field to new operators who would pay a higher fee compared to the Rs 1,659 crore incumbents paid.

The DoT has suggested two options for charging for spectrum: retrospectively, from the date of the award of the licence; and prospectively, from the time the price is decided till the end of the licence period. As per the Cabinet note, this could fetch a Rs 105,803-crore windfall if operators are charged prospectively for the entire spectrum. If they are charged for spectrum over the base 4.4MHz, it's Rs 39,771 crore. If the fee is on spectrum exceeding 6.2MHz, it is Rs 29,288 crore.

Any prospective fee will hurt those who are yet to exhaust a substantial period of their licence the most. These include Tata Teleservices and RCom (10-12 years remaining) who got their licences starting 2001 as against Bharti Airtel and Vodafone (2-6 years remaining) who secured their licences in 1995. Tata and Reliance, who were originally CDMA players before they opted for GSM licences, need to pay for all of their CDMA share plus foot the GSM bill.

The appointment of the new EGoM will prolong the agony of the cancelled licencees waiting for the base price for auction; the only silver lining being the attempt to come to some decision on the telecom mess. However unappetising that may be.

(This story was published in Businessworld Issue Dated 16-07-2012)