Reality Check: Annual review of the Indian telecom sector

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Editor’s Note: Welcome to our weekly Reality Check column. We’ve gathered a group of visionaries and veterans in the mobile industry to give their insights into the marketplace.

BY RAJEEV CHANDRASEKHAR

The telecom sector over the last few months and year, has seen many controversies – most of them a result of public policy ambiguities, failures of regulators and the Government’s administration of the sector.  One year ago Mr. Kapil Sibal assumed office as Minister of Communications & Information Technology in the background of scams and controversies and had promised a rapid cleanup and restoring of a coherent policy framework and administration.

The Minister’s stint therefore deserves an assessment and I have done a detailed analysis of the telecom sector across 26 parameters relating to policy issues, executive decisions and claims made by the Minister who completes one year in office – measuring them against actual performance and documented reports, letters, recommendations of the TRAI, DoT, the CAG, news reports and various judicial forums.

 As a Member of the Parliamentary Standing Committee on IT, I believe it is my duty to undertake such a review of the sector and the performance of the Government and this analysis, forms the first my annual reviews of the telecom sector, shows significant and continued public policy failures across each of the 26 parameters – adversely impacting consumer interest and investor/industry viability and performance in general and further damaging the overall credibility of public policy making and its implementation.

The analysis shows that the DoT has failed to implement major recommendations of the TRAI pending since May 2010 and February 2011 on critical issues such as spectrum allocation and pricing, M&A norms, unified licensing, delinking spectrum from licenses, and others such as collection of dues on account of excess spectrum beyond contracted amount – which is causing additional losses to the exchequer.

An independent analysis of the industry parameters in investments shows not just a sharp decline in capital investments and FDI in the telecom sector, but a deterioration across the board in most operating parameters for the industry, including levels of indebtedness, net profit margins, return on capital and average revenue per minute, minutes of usage, and ARPUs – which are either on the decline or stagnant, especially when adjusted against inflation.

The fact is that the DoT – one year after the CAG report accusing 85 ineligible applicants of fraudulently accessing spectrum in 2008, and the TRAI recommendation for cancellation of 69 companies for failure to meet rollout obligations – has not cancelled a single license in the entire year. The proposed National Telecom Policy (NTP’2011), as it currently stands, would be delayed nearly a year from its original date of announcement. BSNL’s and MTNL’s market shares continue to decline in the profitable wireless market, while the DoT has failed to settle even basic issues such as whether the level of contracted GSM spectrum is 4.4 MHz or 6.2 MHz, which in turn has serious financial implications for the exchequer.

Additionally, officers found guilty of malpractice and misconduct in the Justice Shivraj Patil One Man Committee (OMC) report remain unaffected, with no evidence of disciplinary enquiry against them, and these and other officers in turn continue to stall multiple applications filed with the DoT under the RTI Act in a bid to stall information.

The analysis shows that multiple claims by the government – of accusing the TRAI for not holding auctions, its contention that Swan and Unitech transactions were merely equity infusions and did not represent windfall gains, or that it followed the First Come, First Served (FCFS) policy of 2003 – have been comprehensively rejected both by the Hon’ble Supreme Court and the Special CBI Court on the 2G scam, who have placed the CBI under their monitoring and supervision at one level, and framed charges, rejecting these contentions and ordering trial against all the accused on the other.

Further, the government decisions to introduce ‘Do Not Disturb’ (DND) and Mobile Number Portability (MNP) proved entirely ineffective, with pesky SMSs and unsolicited commercial calls continuing till date on one hand, and merely 2% of the subscriber population making requests for porting numbers on the other.

Things cannot be good unless a major policy overhaul and decision-making with immediate effect, keeping in mind the principles of transparency, public and consumer interest and government revenue were taken, the telecom sector could continue to receive further setbacks – which would be undesirable given the successful growth of this sector and its evolution as a showpiece of private entrepreneurship in infrastructure over the last several years.

(Rajeev Chandrasekhar is a Member of Parliament in the upper house of the Indian Parliament. He is also the former CEO and Chairman of BPL Mobile)

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