With the telecom regulator Trai recommending that 69 of the 131 licences issued since 2006 (122 by Raja) be cancelled, the unravelling of the Raja scam is at a critical stage. The penalties for delayed rollouts in certain circles could work out to around Rs 600 crore.The government is not bound to accept the recommendations, and since officials including former secretary PJ Thomas (currently CVC) and incumbent R Chandrasekhar failed to do this, they may be reluctant to endorse Trai. Others such as DDG-access services AK Srivastava who should have acted on this, as well as declared firms ineligible for licences (the list of 85 in the CAG report includes the 69 in the Trai list) also remain in critical positions in the ministry.
The licences which are to be cancelled include all of Etisalats 15 licences, 19 of Loops 20, 10 of Videocons 20 and 8 of Uninors 22. Most firms have cried foul over the move. For instance, Shyam Sistema, which has 11 licences in the Trai list, has said: We have complied with all rollout obligations in all the 22 telecom circles and have secured over 7 million voice subscribers and over 3,00,000 data customers.
Which is why it is important to clearly note what the Trai has said. The Trai has, for instance, recommended 34 licences be cancelled for not meeting any part of the rollout obligation in Year 1. So, even if Sistema met the rollout obligations in Year 2, it still qualifies for disqualification under the terms of the licence. Trai has also made a distinction between genuine rollouts and technical rollouts. In the case of Etisalat which claims to have 18,000 subscribers in 15 circles, it would appear the rollout is more technical than anything else. According to Trai, 33 licences fall in this category of technical rollouts.
Trais recommendation which was first reported by FE on October 29.
We are examining the rollout record of the new operators and going to recommend to the government in the next few days that penalty be levied as per the licence conditions on those failing to meet rollout obligations. In cases where the deadline is over, we would even recommend cancellation of licences, Trai chairman JS Sarma told FE on October 28.
The delay in sending the final recommendations to the government happened because Trai wanted the latest update from the operators it has used the figures for September 2010.
Not surprisingly, most of the big ones are common to both Trai and CAG lists. Among the licences which Trai has said should be cancelled are all those issued to Swan Telecom (in 15 circles), which later changed its name to Etisalat DB after it sold 45% equity to Etisalat of the UAE for Rs 4,500 crore. The company has already come under scrutiny in the CAG report, which said that Anil Ambanis group firms owned more than 10% in it, including preference shares of Re 1 that it bought at Rs 1,000 each. Under the law, promoters cannot hold more than 10% of two telcos equity in the same circle.
19 of the 20 licences are of Loop Telecom (a company belonging to the Ruias of Essar group) also mentioned in the CAG report, 10 of the 20 are of Videocon groups Datacom, and 8 of the 22 of Uninor (Norways Telenor bought 67.25% of this licence from Unitech for Rs 6,120 crore).
The Trai recommendation is certainly a severe indictment for Raja since he allotted these licences but never audited their performance though this is DoTs job. However, Thomas who was telecom secretary from October 2009 till September 2010 and the incumbent Chandrasekhar will also have to share the blame because they did not initiate any steps to check the non-compliance. In fact, in his short stint, Chandrasekhar did find time to do a cover-up job for Raja, writing to the CAG that it has no business to interfere in policy-making areas but never bothered to audit the performance of the new licensees.
Trai has recommended cancelling 34 licences for no rollouts. These include Etisalat (2) Loop Telecom (14) Sistema Shyam (10) and Uninor (8). In the second category of wrong rollouts are 33 licences, including Etisalat (13), Loop Telecom (5), Datacom now Videocon (10), Sistema Shyam (1) and Aircel (4).
In the cases of wrongful rollout, the companies have rollout compliance certificates from the DoT, but Trai has not recognised them, the reason being they are just technical rollouts rather than commercial ones. It is easy for an operator to show rollout obligations on paper. Many operators resort to technical launches wherein a company puts in place a skeletal network or enters into intra-circle roaming pacts with incumbent operators and shows on record that its services have been launched. These launches are different from commercial launches, where customers can actually go and buy the connections.