Big Telecom slams Trai for unfair treatment

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DoT May Seek Views Of Finance, Law & Commerce Ministries

 INDIA'S largest mobile firms accused the telecom regulator of discriminating against the pioneers in the sector while investors dumped stocks of phone companies on fears that the policy environment is turning unfavourable. 

    Using unusually harsh language, cellphone companies warned that that accepting the regulator's recommendations for the overhaul of licensing rules and the management of scarce wireless spectrum could cause severe harm to a sector that has been bruised in recent months because of a fierce tariff war. 
    The stocks of Bharti Airtel and Idea Cellular continued to decline for a second day and fell by more than 8% on BSE on Wednesday, their lowest level in more than five months. Their shares have fallen by more than a fifth this year compared to a 1.5% decline in the benchmark Sensex, and wiped out tens of thousands of crores in market value. 
    "It seems that the recommendations are designed to punish efficient and performing operators like us for contributing to the growth of the Indian telecom sector and are instead tailor-made to benefit select operators whose contribution to telecom growth and government revenues have been negligible," India's biggest cellphone company Bharti Airtel said in a statement. 
    While a storm of controversy raged over the telecom regulator's recommendations, communications minister A Raja said mobile phone companies will be called for discussions "if need be". 
    Goldman Sachs estimated that Bharti would have to pay $1.13 billion (Rs 5,100 crore) and Idea $716 million if Trai's recommendations linking the price of 2G spectrum to 3G are accepted. Trai chairman JS Sarma said the plan will mean mobile phone companies must pay Rs 30,000-35,000 crore more to the government. 
    The regulator wants operators holding more than 6.2 MHz of 2G spectrum to pay for it at rates determined during the ongoing auction of 3G frequencies. 
    The recommendations further muddy the already murky telecom waters for a government that is still struggling to handle the fallout of the allocation of 2G licences to nine new companies in 2008, allegedly at throwaway prices. No new allocations of 2G spectrum have been made since March 2009 and the allotments made in 2008 are the subject of an investigation by the CBI. Price war hits profitability 
"THE authorities have allowed too many players in this market already and are now making the situation worse by overcharging established players and raising additional barriers to consolidation. Further deterioration of this important high-tech industry that has done so much for the country in the last 10 years is in no one's interest," Vodafone Essar said. 
    The proposals come in the middle of a vicious price war that has damaged the profitability of phone companies, many of whom are now feverishly bidding for 3G spectrum that could cost them thousands of crores. 
    ET reported on Wednesday that some phone firms want a ministerial panel to rework all key policies for the telecom sector. A top official in the telecom department said before a decision to refer the issue to a ministerial panel is taken, the views of the finance, law and commerce ministries will be sought. In recommendations unveiled on Tuesday, Trai said GSM operators with more than 6.2 MHz of 2G airwaves must pay a one-time fee to keep spectrum beyond this limit. It wants future allocations of 2G spectrum benchmarked against the price of 3G frequencies and linked to rollouts by phone companies instead the current practice of providing them based on the number of customers they have. 
    Trai wants rules governing mergers and acquisitions to be changed to do away with a clause that prevents promoters of companies that acquired telecom licences in early 2008 from exiting their ventures for at least three years. But it has said the combined entity cannot command more than a 30% market share, a move which could prevent Bharti Airtel from making an acquisition. Bharti Airtel described the recommendations as "shocking, arbitrary and retrograde", observing that they "overturn all existing policies of the department of telecom for the last 15 years, recommendations made by various government committees and even Trai's own earlier recommendations". 
    Reliance Communications is alone among the major phone companies in welcoming Trai's proposed new rules. Vodafone said Trai has failed to "redress discrimination" between those who hold GSM spectrum and the dualtechnology operators, terming the proposals "grossly and unfairly" discriminatory.