TRAI/DoT could be hoodwinked again

#1
Over last week or so, there has been some noise about allowing consolidation in Mobile space. Lot of the new entrants that won nationwide 2G spectrum have not deployed nationwide. Most of them have deployed in just 5-6 circles. The massive price war after the 2G spectrum allocation has made it unprofitable for new entrants to deploy networks. However, TRAI should be careful how this is handled.

There is some talk of the companies being allowed to hand back spectrum, and get a refund of the license fees. This is the best case for DoT/TRAI, but the new entrants want TRAI/DoT to come up with a policy that allows consolidation, so that existing mobile players can buy them out. Since most of these new entrants dont have any network or customers to speak of, consolidation effectively is just a back door way to sell the spectrum.

If TRAI/DoT allow consolidation, they will just be allowing these companies to profit from the much higher spectrum prices currently, and the government will get absolutely nothing. If they stick to their guns, and insist that spectrum can be returned and the license fee will be refunded, they can ensure that this money is not lost.

However, there will be problems for one operator - Uninor. While Unitech just paid the license fee to the government, Telenor has paid over Rs 6000 crores for a 67% stake in Uninor. So Telenor cannot afford to get just a refund of the license fee. If TRAI sticks to their guns, Telenor will have no choice but to compete in the market, and roll out a nationwide network - which they have realized is not practical anymore, in the light of the price war. However, if TRAI bends its rules to suit Telenor, all the other players would get a massive benefit.

Will be interesting to see which way this will play out, and whether India will once again see private parties benefitting with windfall profits, without fulfilling any of their contractual obligations.

The best way for the government, would be to use hardball tactics - force the new entrants to either create a nationwide network, or hand over the spectrum for a refund of the license fee. This returned spectrum can then be auctioned once again, at market rates as 3G spectrum.

I really hope Mr Manmohan Singh keeps an eye on the telecom ministry, so that Mr Raja cannot get away with his funny stuff once again.
 

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