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Live: Indian Telecom CEOs Protest Regulators Auction Recommendations

The Cellular Operators Association of India (COAI) has brought together the top management of five telecom operators, who are addressing the press right now, voicing their concerns about the TRAI’s proposed auction plan. On the panel are Sanjay Kapoor, CEO (India & South Asia), Airtel; Himanshu Kampania, MD of Idea Cellular, Rajiv Bawa, Chief Representative Officer, Telenor India; Arvind Bali, CEO & Director of Videocon; Martin Pieters, CEO & MD, Vodafone.

Sanjay Kapoor, CEO (India & South Asia), Airtel:

The TRAI recommendations are flawed and retrograde, regressive and uncertain, which will harm consumer interest, and will ring the death knell for the Indian telecom industry. The members of COAI are heartened by the Telecom Commission asking the TRAI for an explanation. You’re aware that India, today, carries 8.3 billion minutes today. With 911 million customers, we are the second largest telecom market in the world, provide employment to 10 million people, directly and indirectly. The amounts that we have contributed to the national exchequer 34000 crores, around 3% of total government revenue, excluding the amount contributed for 3G and BWA auctions, including which it would be 12% to the government in 2011.

Home delivery would not exist without Telecom, we gave life to the music industry with ringtones and ringback tones, we provide timely information to farmers.

It shatters the investors confidence, and now it’s become a habit how much we’ve gone down in terms of PAT. It’s not because we don’t know how to run efficient businesses, but how tough the environment is. The proposed policy directly harms rural connectivity. The sustainability of the existing operators. The new pricing makes the business case even more awful. I cannot understand the number floating around that it will lead to a 2 paise increase in price. Our belief is that the implication could be as high as 100% of the existing rates to be compensated by the customers. This would vary circle to circle. This doesn’t take into account any spectrum refarming, which would take prices further.

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Refarming: If we were to surrender the 900 MHz spectrum and switch to 1800 MHz, you as customers will find dark holes inside and in streets and bylanes. The rural part of the country will seem disconnected tomorrow. The network was set up for 1800 Mhz, because the penetration and throw for 900MHz would not be available. We’re perplexed and confused because on May 2010, the regulator set out to set pricing for 2G in line with 3G. The pricing calculations have changed over the past two years, and this recommendation is challengeable on all consumer counts.

The basic principles around the Draft NPT 2012 are not being followed. The GDP gets hampered because the teledesity gets hampered, it leads to employment loss.

We will need to put more towers for 1800 MHz, with more diesel, and this will impact the environment.

An obsolescence is being forced on the industry. When we plan a design of 900 MHz, I plan a site in the center of the village, because I can cover it with one site. If I plan with 1800 MHz, then I need to flank sites. It’s like putting a brand new network once again. Now you’re saying for the same set of revenues, write off assets, then someone will come and invest in the same assets, and then someone will come and invest for the same set of assets (900Mhz) when refarmed. We have weak balance sheets, it is not hidden, and we’re destroying national infrastructure. It is a completely, a destruction for the entire industry, unmitigated.

Our key concerns:
– Refarming or redistribution. This is redistribution.
– Artificial scarcity of spectrum is being created today. There is spectrum available but a limit amount of spectrum is being auctioned, and this will push up auction prices.
– High Reserve Price: on the basis of ARPU (equivalent to PPP), the reserve price is 48 times.
– New rollout obligations: The price is being discovered through auctions. Once he has got the spectrum, why are we penalizing them? There should be incentives for deeper and faster rollouts.

Our recommendations:
– Reduce the reserve price drastically
– Reject the recommendations on refarming
– All available spectrum to be auctioned
– Allow market to discover the true spectrum price
– Do away with rollout obligations for auctioned spectrum.

Martin Pieters, MD, Vodafone: The moment you put up the price, there is a category of people who can no longer afford it. It is not in the interest of India. Telecom has driven social and economic development. The pricing in the metros are so high, that we would have to put it so high to cover the cost. The guys in the rural areas will end up subsidising the guys in the city, whereas it is usually the other way around.

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Himanshu Kampania, MD, Idea Cellular: We are in not a debate with anybody. We’ve driven from NTP 1999, a single minded pursuit for driving growth. The equipment is the same as around the world, but we operate at the worlds lowest tariff. The spectrum charges will be 48 times, so how will it now have an impact? We’re contesting the notion of 2 paise increment in prices.

Rajiv Bawa, Telenor India: We compete in the market and fight all the time, and we’ll continue to have differences, but today we are here because we have a common cause, and there are things that are not good for a new player, and not good for an incumbent. The premise is the supreme court order, which say that licenses are quashed, and fresh licenses need to be given through an auction. At the most, one new player will be able to come in at these prices. This will impact tariffs, the rollout obligations will impact, on top of this.

Sanjay Kapoor, Airtel: collectively, this will cost the industry tens of thousands of crores, and this is a make or break amount for us. I don’t know how many will be able to come back and bid for 900 MHz.

Himanshu Kampania, Idea: The question is, for what gain is this being done. Whose assets are these? Aren’t these national assets, productive assets? Why write off productive assets? Voice business grows, demand for voice grows, rural has abysmal penetration, and we go through this process of disruption.

Martin Pieters, Vodafone: The concept of an auction is to have bidding for a scarce natural resource. The price is not a market discovered price. If you had 5 or 6 blocks of spectrum for 3G, then it would have had a different price. There was a low reserve price for 3G, but the price was high.

Sanjay Kapoor, Airtel: We’re looking for a drastic reduction in price, but I dont have an absolute number. The world over, when you look at the reserve prices, let it be low, and let the market discover the price. Any business case for a new technology has to be seen in a longer period of time but there are business cases which dont make sense in a 20 year horizon, and this is one of them.

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Himanshu Kampania, Idea Cellular: There was in 2008, an administrative allocation of spectum, and it has come back to the government. Spectrum was allocated at Rs 1658 crores. The supreme court order only says that have an auction. We can index Rs 1658 to 2012. Remember that this is a reserve price. There is no connect between reserve price and final price.

Sanjay Kapoor, Airtel: in our meeting with Kapil Sibal – he’s the champion of this industry – he restored confidence going forward, and understood our issues patiently, and we believe he will bring in more transparency, equity, and keep the sustainability before anything is framed.

Martin Pieters, Vodafone: This industry has interest in bringing all the spectrum into play, because spectrum is renewable. Every day you dont use it, you lose out. We need more spectrum. The average spectrum here is 6.4 Mhz of spectrum, while everywhere else, you have 22 MHz. We’re struggling for spectrum.

Sanjay Kapoor, Airtel: The largest operators in the US have 42000 sites because they have more spectrum. The moment you fragment spectrum into smaller pieces, the operator ahs to have 120000-130000 sites.

Himanshu Kampania, Idea: The way refarming has been proposed, it is destructive in nature. We reject the current form.

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