Wednesday, July 20, 2016

Loot of Indian Telecom Companies by the Narendra Modi government continues....
The Cabinet had recently cleared a mega-spectrum auction plan for seven bands, including that of 700 MHz. However, analysts had expressed concern over the high base price for the premium 700 MHz. A company interested in buying spectrum in 700 Mhz band will need to shell out a minimum of Rs.57,425 crore for a block of 5 Mhz on pan-India basis. This band alone has the potential to fetch bids worth over Rs.4 lakh crore. 

Aggressive bidding for 700 MHz band will hurt the financials of telecom companies which are already reeling under very high level of debt. From where such large sums of money will come? Has the Narendra Modi government ever thought of it, before placing astronomical rates for spectrum? Now what will happen is that after sometime, the telecos will definitely start raising the tariff rates; hurting the common man. What to say ....!! 

Idea management told analysts that it does not see a spectrum supply constraint anymore. Idea sees competition to intensity over two years but expects gains in revenue from increased market share. Another telecom company, Telenor has also decided against participating in the upcoming spectrum sale in India, signalling the Norwegian mobile phone operator's clear intent of exiting a market where it has been making losses and has struggled to expand operations. 

Moreover, The Narendra Modi government has already created a mess of the telecom sector, by putting Ravi Shankar Prasad in charge; who is inefficient in dealing such complex matters as telecom.....But then what is new, Narendra Modi's ministry is all full of stooges; though one of them have been shifted from the Human Resources (Read Education) to Textiles...and Minister of State for Railways Manoj Sinha is being given Telecom portfolio, that's split from Information Technology, a department that will stay with Ravi Shankar Prasad, who is also the country's new law minister after Prime Minister Narendra Modi's massive reshuffle of his cabinet's portfolios.
Even after 14 years, when the dispute first arose, there is still no clarity on what should be included/excluded from telecom ‘revenues’ – and since there is no clarity, whichever way the case is finally decided, where is the question of paying a penalty?
Should a foreign exchange gain/loss a Bharti Airtel makes on its African operations be included in this or not? In the initial years, Vodafone operated in India through eight companies which, on occasion, lent money to one another – is this to be included in telecom ‘revenue’ and should the government be given a share of this? Clearly not, you’d think, but that is what the case is all about.
While the new telecom minister can take a call on the CAG report once a decision is taken on what ‘revenue’ is, the decision has larger ramifications. Not including foreign exchange losses, capital gains, or interest earnings on company deposits in ‘revenue’ is an easy decision. But if payments made to other telcos are included in revenue and the government gets license/spectrum fees on this, this will discourage infrastructure sharing; it will also ensure MVNOs never take off.  In the rush to apportion blame, no one is talking about the real issue.












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