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TMCNet:  Bad luck & trouble for India Inc [Financial Express (India)]

[December 31, 2012]

Bad luck & trouble for India Inc [Financial Express (India)]

(Financial Express (India) Via Acquire Media NewsEdge) The year went from bad to worse for corporates as the govt not only dragged its feet on policy matters, but also raked up 'settled' issues. The telecom sector is an example India Inc could be forgiven for wishing that the year 2012 never happened. Policy hurdles, delayed clearances to projects and costly funds were the hallmarks of a year that came to symbolise the term 'policy paralysis'. The vocal and the visible among India Inc complained aloud, shot off letters and initiated signature campaigns. But just as one crisis seemed to have subsided, another sprang, and from the most unlikely of quarters.



One could understand delays in clearing new projects or slowdown in taking new policy initiatives, but when settled issues were re-opened with fresh interpretations, the blame squarely lay with the government as it seemed that there was no coherence in its thoughts and actions.

The story of this confusion on the government's part - which damaged the industry - could be best seen through the prism of the 3G intra-circle roaming saga, which, in general, involved the whole of the telecom industry, but, in particular, the country's top three mobile operators - Bharti Airtel, Vodafone and Idea Cellular. Their plight and the way the government (read the department of telecommunications) went after them on the issue best describes why the industry could have done without the year 2012.

The telecom industry paid around R67,000 crore in 2010 when they participated in the auctions for 3G spectrum. It was easily the most successful auctions the government had carried out. Considering that it took place around the time the 2G spectrum scam of 2007-08 was unfolding, only showed that the industry still had hopes in a successful sector and was willing to take risks.

Since the bids were aggressive and going high, none of the operators could bag 3G spectrum for all the 22 circles. This meant that they needed to share spectrum with others in circles where they did not have it, so that the limit in terms of presence in circles did not reflect in terms of subscriber base. A concept of intra-circle roaming emerged. Operators entered into pacts with one another to provide 3G services to their subscribers in circles where they did not have 3G spectrum. This was known as intra-circle roaming, which is distinct from inter-circle roaming; the latter basically ensures that subscribers continue to get services as they move outside their home circles.

While inter-circle roaming has been an established practice ever since mobile services started in the country, intra-circle roaming was a new concept, which was first allowed in India in 2009 when the department of telecommunications allowed a new service operator, Swan Telecom, to enter into a pact with state-owned BSNL to provide intra-circle roaming. The idea was that the new operator would be able to start services faster because it would not have to wait to set up its own network.

It's another matter that the pact did not work out and Swan could never get started and, later, got embroiled in the 2G spectrum scam.

For 3G services, after entering into intra-circle roaming pacts, operators were slowly garnering subscribers when suddenly the DoT woke up and ordered them to stop the practice, as it felt that it was against the licence conditions. The operators protested because there were specific, written clarifications sought on the subject.

The volte face by the DoT surprised the industry. The matter went to the Telecom Disputes Settlement Appellate Tribunal (TDSAT), which gave a 1:1 split verdict. The TDSAT is a three-member body and, therefore, a split verdict of this nature should not have happened. However, reflecting another kind of paralysis, the government had not appointed a replacement for a retired member. The industry interpreted the split verdict to mean that status quo prevailed and they could carry on with their services. However, the government had a different take and considered it as a victory for itself.

It asked operators to stop intra-circle roaming, only for the order to be challenged in the Delhi High Court, which said that staus quo should prevail and the government had the right to move the tribunal again seeking a proper direction. Matters currently rest at this level because the full quorum of the TDSAT is still not there. Operators continue to provide the services, but uncertainty prevails.

So, here was an industry, seemingly the poster boy of liberalisation, which paid huge amounts at the auctions to get spectrum. It sought written clarifications before providing roaming services. And, still, the DoT went after the companies to stop them from providing such services. And all this when a new telecom policy was in works, which aimed at liberal measures like spectrum trading and sharing.

A somewhat similar fate befell US-based Qualcomm, which had participated in the broadband wireless access auctions in 2010, but a year later, was denied spectrum on what was termed as some flimsy, procedural lapse. The company protested and TDSAT intervened against DoT's action, which, then, sought to curtail its licence by two years. This was also overruled by TDSAT. The company eventually came out victorious, but not before its India experience was soured.

The travails of the telecom industry were hardly an exception, though. Here, at least the industry was able to fight back and contain the damage. In several other sectors, there was no such luck.

In the slow lane The year gone by was characterised by policy hurdles and slack decision-making by the government, and it took its toll on the industry. Telecom, which has been the poster child of liberalisation, saw growth slowing with companies reporting lower gross subscriber additions to their networks. The slowdown in growth and profitability continued, but the government did not respond with alacrity. A very high base price was fixed for auctions of 2G spectrum and protests by operators were not heeded. The result was that the auction flopped. For infrastructure projects, land acquisition problems continued with the Land Bill getting cleared by the Cabinet only towards the end of the year. Delayed environment clearances were also a big hurdle with the government deciding to constitute a Cabinet Committee on Investments to fast track approvals for projects above R1,000 crore, again only towards the end of the year Copyright 2012 The Indian Express Online Media Pvt. Ltd., distributed by Contify.com Credit: Rishi Raj (c) 2012 The Indian Express Online Media Pvt. Ltd., distributed by Contify.com

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