The Hindu Business Line : Telecom FDI hike plan not wired

WHILE the past five years have seen a radical transformation in the telecom policy, putting the sector on a high growth trajectory, there are quite a few decisions that remain on the unfinished agenda list.

Right on top is the issue of the foreign direct investment (FDI) limit in the telecom sector, which was close to being hiked to 74 per cent from the existing 49 per cent. Despite the commitment of Union Communications Minister, Mr Arun Shourie, to the cellular operators, the Union Cabinet which took up the issue last month decided not to pursue it further, given the opposition raised by the security agencies and a couple of influential Ministers.

The hike in FDI was expected to benefit large cellular operators like Bharti, Hutch and Idea Cellular who are in need of additional investments for funding their expansion plans. They will now have to wait for the 14th Lok Sabha to be constituted before pushing for a revival of the proposal.

Also the move towards a full convergence of telecom and broadcasting services will have to await the formation of a new Government. The Communication Convergence Bill has been pending in Parliament for close to three years now, without any progress. The Government is also yet to come out with a unified policy which would enable the operator to provide any service that he desires — basic, cellular, long distance, Internet or satellite — with just one licence.

Another issue that has been affecting the mobile operators is the release of additional radio frequency spectrum that would allow them to offer better service to the customers. A decision is yet to be taken, and the operators feel constrained by the limited spectrum that has been allotted to them.

As regards the public sector enterprises, although the Government has indicated that it would speed up the disinvestment process of telecom PSUs, the files are yet to move on this front. Mahanagar Telephone Nigam Ltd (MTNL), ITI and TCIL were supposed to be put on the block during the Government's present term but have not yet been short-listed.

While these decisions will certainly be on top of the agenda for the new Government that assumes office, to be fair to the present policy makers, it must be mentioned that many of its decisions have helped accelerate the growth in this sector.

Chronologically speaking the first such decision was the corporatisation of the largest telecom company - Bharat Sanchar Nigam Ltd (BSNL). Its delinking from the Department of Telecommunications (DoT), transformed BSNL into a "board-run" company with quite a bit of autonomy to take decisions in commercial interest. While much more needs to be done to transform it into a fully independent entity, it certainly was seen as a step in the right direction.

This was followed by the successful disinvestment of Videsh Sanchar Nigam Ltd (VSNL), which had a monopoly in the international long distance segment. The Tata Group now has strategic control of the company with almost nil interference from the Government.

Thereafter in stages, the basic, national long distance and international long distance services were opened up for full competition giving the customers a much wider choice in terms of operators. Internet telephony too was legalised making it possible for subscribers to communicate with friends and relatives abroad at relatively cheaper rates over the web. The cellular subscriber was also given a greater choice with the decision to allow as many as four GSM mobile operators in each circle.

In a more recent decision that has actually led to stability in the sector, the Government introduced the unified access service licence (UASL) regime. The GSM operators withdrew their long-standing litigation against the policy to allow limited mobility CDMA services. Under the new licence, any operator can offer basic, GSM cellular or CDMA mobile services with just one licence as long as suitable entry fees are paid. Cellular operators are also now given more flexibility for mergers and acquisitions within the same circle area.

Another notable policy decision has been to reduce the customs duties on mobile handsets. From close to 40 per cent five years ago, the average duty is now a little over five per cent. This has led to a decline in the grey market for these phones and also given the subscribers a wider choice of genuine and legal handsets.

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