1. Trai ease of doing business good, but regulator must be more circumspect in fixing reserve prices

Trai ease of doing business good, but regulator must be more circumspect in fixing reserve prices

Given how long it can take to get various approvals, telecom regulator Trai has done well to come up with various ease of doing business recommendations.

By: | Published: December 4, 2017 2:05 AM
Trai, ease of doing business, NCLT, department of telecommunications, Airtel,Vodafone, RJio, It recommends that if the department of telecommunications (DoT) has any objections to a merger, it should file these within a month—of course, given the delays at other bodies like the NCLT and the CCI, it is not clear how much this alone will help.

Given how long it can take to get various approvals, telecom regulator Trai has done well to come up with various ease of doing business recommendations. It recommends that if the department of telecommunications (DoT) has any objections to a merger, it should file these within a month—of course, given the delays at other bodies like the NCLT and the CCI, it is not clear how much this alone will help. Similarly, given the controversy over Trai recommending the levying of a Rs 3,050 crore fine on Bharti Airtel, Vodafone and Idea for not providing enough points of interconnection (PoI) to RJio last year, the regulator has done well to say the DoT should grade various types of violations and specify the penalty for each since the tendency is to levy the maximum penalty of Rs 50 crore per circle for any violation. In the Airtel/Vodafone/Idea case, telcos said they had provided RJio the PoIs it needed and, as for the rest, they were allowed 90 days to do this; so when Trai recommended a penalty, it didn’t even allow them the requisite time period to do so. Nor is this the first time that such large penalties have been slapped on telcos. Good suggestions have also been made to ease spectrum rules after merger, such as the one to allow trading of excess spectrum—suggestions made on spectrum caps, in a different set of recommendations, will also do a lot to make things easier.

But these changes don’t address the fundamental issue of the industry being bled to death by very high government levies. The industry owes banks and others Rs 4.6 lakh crore and has deferred payment liabilities of Rs 3.1 lakh crore—with telcos having spent upwards of  Rs 9 lakh crore on capex, the industry needs around Rs 140,000 crore of ebitda just to meet interest and amortisation costs versus the Rs 50,000 crore or so of industry ebitda today. While RJio’s pricing worsened matters, the industry’s problems predate RJio, and the combination of high spectrum prices and government levies has meant the share of revenue going to the government by way of recurring licence/spectrum charges and auction-bids rose from 11% in FY07 to 32.4% in FY17—if service taxes are included, the number rose from 23.2% to 47.4%. While Trai would like to claim this is really the DoT’s remit, as a regulator, it needs to draw attention to this, even make recommendations. More important, since Trai’s reserve prices for various auctions has been responsible for a major part of the mess, the regulator needs to be far more circumspect while fixing reserve prices.

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