• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

S. Vaidya Nathan

The Communications Minister, Mr Arun Shourie... He indicated that Reliance Infocomm has violated norms prescribed for WLL operators.

THE Government policy relating to mobile telephony services appears to be clearly tilting in favour of Reliance Infocomm and Tata Teleservices which provide limited mobility services under the wireless-in-local-loop (WLL) as part of basic service licence. The former has tweaked this limited mobility service into a full-fledged mobile one. Even the Union Communications Minister, Mr Arun Shourie, has indicated that the company has violated the norms prescribed for WLL operators. (However, the company has stated that it is in compliance with all the norms).

The policy measures, such as higher limit for foreign investment in the telecom sector and intra-circle mergers, to name a couple, announced by the Group of Ministers on Telecom (GoM) last week, prima facie appear to be tailored to the requirements of GSM players in the mobile space, such as Bharti and Hutch, among others. But they are clearly sops to soften the major GSM players as moves towards introducing a unified licence gathers momentum.

Notably, the Government has also indicated that the GoM has approved the idea of a unified licence for the telecom sector and decided to put the Convergence Bill on the backburner. The unified licence is the long-term solution to the quagmire in the telecom sector. But the policy thrust appears to be to usher it in at relatively lower cost to the private WLL players.

That the unified licence will benefit Reliance Infocomm and Tata Teleservices immensely is beyond doubt. It would place them on an even footing with mobile players in the GSM space. In the latter, barring Bharti and Hutch, the prospects for the others, even now, appear to be rather dim. Once unified licence is ushered in, they will have to compete with players who entered the fray with significant cost advantages in the area of entry fee.

Also, the unified licence is the only way by which the government can circumvent the ruling by the telecom appellate tribunal that has sought to place stringent restrictions on WLL operations. The mass of over three million customers that the private WLL operators now service has been used as a fait accompli for introducing a unified licence on grounds of public policy.

If the Government's policy thrust is driven by the requirements of not harming the WLL customer base, created wrongly by peddling mobile services under the garb of limited mobility services, a different mass of customers (GSM users) are set to bear a stiff price.

The cost and pricing structure of GSM players are influenced by the huge entry fee that they forked out. Their customers (numbering about 17.5 million in end August) are now bearing the price, and may have to do for a long time to come. The pressure may also increase over time as the effects of the recent tariff cuts wear out.

If the unified licence is ushered in, this set of customers will be placed at a disadvantage, an outcome that also goes against the grain of public policy, and that too, for a much larger base of consumers compared to the WLL mass. This disadvantage can be neutralised only if the issues of one-entry fee costs, spectrum allocation and inter-connect charges are handled even-handedly.

In this backdrop, the proposed meeting of the GoM on October 4, and the views of TRAI and Mr Deepak Parekh, who are looking into the nuts and bolts of moving to a unified licence, assume greater importance than the measures unveiled last week, which are half-hearted in nature and do not serve the long-term interests of the GSM players.

The hike in the limit for foreign investment from 49 per cent to 74 per cent may be largely cosmetic as the ceiling for Foreign Direct Investment (FDI) remains capped at 49 per cent. The higher limit can be reached only via the FII route, as a proxy for FDI, which even the existing companies may not be fully comfortable with.

Importantly, the proposed structure for foreign investment could deter global telecom majors from stepping up investments in the Indian market or establishing a presence through acquisitions. As for intra-circle mergers, the requirement that there must be at least three players could rule this out as a strategic option in many circles.

The half-hearted nature of the concessions handed out suggest that these are only sops and not aimed at imparting vibrancy to the mobile services market. This aspect could also buy time for limited mobility players to build up more numbers that could buttress the public policy requirement angle which has been the plea to legitimise a back-door entry into mobile services.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Amzel Automotive: Accept

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line