One can have no quarrel with the contours of the telecom policy that communications minister Kapil Sibal promises to put in place before the end of the year. He has correctly identified several issues, including unified licences, audit of spectrum held by telecom players, reduction in tenure of renewed
licenses from 20 years to 10, liberalising norms for mergers and acquisitions, etc. These issues are still ambiguous: for instance, if the licences are only for 10 years, their cost will have to come down, else they will be prohibitively expensive. The unified licence scheme will be welcome as different circles now have different licences, plus factors like NLD and ILD and a lot of procedural hassles. A single national licence would be more rational. It is to be expected that only national players will finally remain in the picture. Mr Sibal will also simplify M&A procedures. There is some ambiguity on what will happen now to spectrum when two parties merge. How much can the merged entity retain? For example, though Spice Telecom merged with Idea nearly two years back, there are still unresolved issues over the spectrum owned by the merged entity. Mr Sibal will also form a committee to draft the National Spectrum Act.
The skilful lawyer that he is, Mr Sibal has cleverly first tackled issues on which there is little opposition from the existing major players. Next is the question of spectrum charge, for which there will be a committee, with backup from the telecom regulator. Another matter requiring the minister’s urgent attention is the need to keep an alternative plan ready in case the Supreme Court decides to cancel all 122 licences given by disgraced former communications minister A. Raja. These licensees were simply hoarding spectrum, and they also caused the government a considerable revenue loss in fees and service charges. Some of them may have had valid reasons, which the court will look into, but most appeared to have been in the business of waiting to resell the licences they secured through political clout or other means. Further, the minister must find ways to encourage the more serious players to remain in the field, but the uncertainty should be reduced.
One of the most important issues that Mr Sibal must tackle without further delay is that of local manufacturers of telecom equipment. He will need to find ways to encourage the use of local equipment and give relief if a certain percentage of indigenous equipment is used by the telecom operators. Turning around the existing telecom PSUs and manufacturers like ITI and Telecom Consultants India Ltd will be a major challenge. BSNL suffered losses of `5,000 crores, MTNL `2,800 crores and ITI `360 crores this year, and this affects the livelihood of over three lakh people. Salaries are said to be increasing at the rate of 10 per cent annually, while revenues are falling at the same rate. The wage bill in relation to total revenue in public sector telecom companies like BSNL and MTNL is around 40 per cent, compared to just 3.9 per cent for Bharti Airtel and 4.5 per cent at Reliance Communications. Mr Sibal is new to the communications portfolio, but there are several well-intentioned and knowledgeable people whose experience he can draw on to tackle these difficult problems. BSNL, for instance, has an invaluable underground network, from which it can easily earn revenue of at least `20,000 crores if used rationally. Mr Sibal’s predecessor had appeared more interested in almost killing the public sector, and his senior bureaucrats went along with him, leading to the neglect of these companies.