The Hindu Business Line : Regulator as a risk

TRAI's moves are no surprise because it was responsible for patching on WLL to the basic service when the licences were handed out, about three years ago. All along, the WLL route has been a backdoor, low-cost entry into full-fledged mobile services.

IF YOU are an investor in telecom stocks, especially those in the conventional cellular mobile business, beware of the risks posed by the regulatory body, the Telecom Regulatory Authority of India (TRAI). It has made life easy for one segment — those providing limited mobility services (better known as WLL services) as part of their basic telephony operations. The two major players are: Tata Teleservices, which has kept to the WLL word, and Reliance Infocomm, which has made it as close to a mobile service as possible.

The position had become tricky for Reliance Infocomm when the Telecom Disputes Settlement Appellate Tribunal (TDSAT) had three months ago ruled that restrictions must be imposed on WLL services to keep it distinct from cellular services. TRAI's latest moves have changed the situation.

TRAI has confined the unified licence to basic and cellular services as covering others would take at least six more months. But that would have meant placing restrictions on the WLL players. The TDSAT deadline of four months for doing so is also close on hand. So TRAI has rushed in with a proposal that sets Reliance Infocomm free from the troubles that strict implementation of the TDSAT ruling would have meant.

To categorise this now, as a removal of licence raj is wishful thinking. If it benefits the five million WLL customers, it places the 18 million cellular consumers at a disadvantage.

The timing is interesting. At the Group of Ministers on Telecom meeting in early October, the focus was on allowing a stake of up to 74 per cent for foreign investors in telecom and intra-circle mergers. Issues such as spectrum allocation and spectrum charges also figured prominently. That a move to unified licence for all services was under consideration was also indicated. But, now, it has acted only on the latter, and that too in a limited way. No concrete action has been taken on the rest.

What has instead happened is that newer twists, such as concerns from the intelligence agencies, have been introduced to place the stake hike limit to 74 per cent on the backburner. This will work against the cellular players, including the two bigwigs — Bharti Tele-Ventures, which has a tie-up with Singtel of Singapore and Hutch, which is backed by Hutchison Whampoa of Hong Kong. Restrictions on FDI would certainly limit their capacity to compete effectively.

TRAI's moves are no surprise because it was responsible, in the first place, for patching on the WLL service as an adjunct to the basic service when the licences were handed out about three years ago. That the CDMA technology to be used for WLL was suitable for a full-fledged mobile service was well known. Clearly, all along, the WLL route has been a backdoor, low-cost entry into full-fledged mobile services.

The penalty imposed on Reliance Infocomm for use of multiple registrations and call forwarding is something that it would only be too glad to pay, under a conducive regime. TRAI's views that these techniques are a march of technology have no sound underpinning. With issues not addressed in a holistic manner, the risks of equity investing and lending to the telecom sector has enhanced.

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