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Monday, Nov 03, 2003

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Unified, but not fully untangled

IT IS TOO early to say if the Union Cabinet's approval of the Unified Licensing Regime for basic and cellular services signals an end to the festering litigation over limited mobility in the telecom sector. The Cabinet decision goes along with the recommendations of the Telecom Regulatory Authority of India on the subject and cellular operators, whose interests are directly affected, have not yet made known their stand on the subject. In the event, the objective of ushering in a litigation-free environment that prompted the TRAI recommendation for unified licensing and which has now been endorsed by the Government, may fail to materialise. The TRAI recommendations fell short both in terms of scope and basis of computation of the additional entry fees payable by the limited mobility services offered by basic operators.

Also, having failed to go the whole hog in consolidating all telecom services, including long-distance and Internet services, the regulator's intentions will be put to serious test. While the policy move has been pushed through in haste, neither the regulator nor the Group of Ministers on Telecom has addressed many of the contentious issues such as the foreign direct investment, spectrum allocation and charges, and intra-circle mergers. Raising the foreign direct investment limit on basic, cellular and long-distance services from 49 per cent to 74 per cent has once again been put on the backburner. Citing objections from intelligence agencies, the Cabinet has deferred the consideration of this decision to the annual budgetary exercise. It is a moot point as to how between now and end February, when the Budget is presented, there is going to be any clarity on the security aspect.

It is significant that according to the recent TRAI recommendations, to achieve a target of 100 million subscribers (cellular and limited mobility), the required investment is of the order of Rs 50,000 crore which the existing players are going to be hard put it to raise on their own. If the Government is serious about teledensity targets and low consumer tariffs, raising the FDI ceiling makes eminent sense. If the best carriers are to enter the Indian telecom services with financial participation and continuously upgrade technology in line with global trends, the prudent course will be to offer them the controlling stake and management control. The security fears on this score are largely misplaced considering that many developed and developing countries place no fetters on foreign ownership in telecom.

The use of radio spectrum and charges for such usage are in some ways linked to the number of players in a given area and this, in turn, has implications for the policy on allowing intra-circle mergers. Thus, from a purely procedural perspective, the decision on unified licensing could have been linked to that on spectrum usage or industry consolidation.

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