Column : The consumer bogey again

Written by Rishi Raj | Updated: Apr 13 2012, 06:31am hrs
With the government finally deciding to make a Presidential reference in the 2G case and the Supreme Court agreeing to hear the governments review petition relating to its right in deciding the allocation of natural resources through means other than auctions, the focus has once again shifted to the fate of the operators whose licences stand to be cancelled by June 2. This, despite the fact that the SC dismissed the review petitions of the seven operators last week.

Theres a view amongst a section of the industry that, irrespective of whether Raja was wrong or right, why penalise the consumers who may be subscribing to the services of the concerned operators There are also voices apprehensive of a rise in mobile phone tariffs as a result of the cancellation. Its therefore time once again to sift fact from fiction and illustrate that apart from the companies who stand to lose their licences, the consumer or the government does not lose anything. Overall, even the telecom industry does not stand to lose anything because even after the cancellations, the country would have 6-7 operators per circle, which is a world record and would ensure that the market remains competitive enough to protect consumer interests.

The numbers are as follows: as on February end, the countrys total mobile subscriber-base stood at 911 million. The 122 operators whose licences stand to be cancelled by June 2 contribute only 72 million to this. Thus, their combined market share is an abysmal 7.9%. There were nine operators who got the new licences that are to be cancelled, but the bulk of the 72 million subscribers are contributed by only two operatorsUninor and Sistema Shyam. Hold your breath, the Telecom Regulatory Authority of India now comes out with the active and dormant users and on this count the performance of the newer operates dips even further. Out of the 72 million, only 43 million are active subscribers, meaning the remaining already use another phone connection and hardly use the services of these new operators. If the active subscriber numbers are taken, their combined market-share drops to 4.3%. The numbers thus clearly bring out that no loss would accrue to the subscribers of these operators and definitely not impact competition or tariffs.

Still, lets think of even this ultra-small base of subscribers. They have the facility of using the mobile number portability to port out to other operators. As on February, 37.11 million users have already used the MNP facility to change operators without any disruption to their services. Naturally, the affected 43 million can also be effectively ported out.

Having established that neither consumers nor the industry gets adversely affected by the demise of the 122 licensees, lets see whether the government stands to lose anything by way of revenue-share licence fees. Three years after the allocation of licences and the commencement of services, the government earns a miniscule amount from them by way of revenue-share licence fees, which is calculated as a percentage (ranging from 6-10% across circles) of their adjusted gross revenue (AGR). For the October-December period of 2011, these operators earned a gross revenue of R1,492.9 crore and an AGR of R942.02 crore, compared to the industrys total of R49,339.04 crore and R34,081.29 crore, respectively. This is 2.76% of the total AGR of the industry.

Telecom minister Kapil Sibals telecom policy aims at balancing the interests of the industry, government and consumers and it is clearly established that these 122 licensees bring no gains to any of these three. The court has been sympathetic to their cause by asking the government to conduct fresh auctions and give these operators a chance to participate in them. Trai is working out a set of recommendations on conducting the auctions and theres enough spectrum to ensure that the bid price would not be exorbitantly high. Out of nine operators, threeSTel, Etisalat DB and Loop Telecomhave already announced the shutting of their businesses, proving that they are not serious operators and are not interested in participating in any fresh auctions. Two of themTata Telesservices and Idea Cellularare incumbent operators who have lost licences of circles that hardly contribute much to either their subscriber or revenue base. OneSpicehas already merged with Idea. This leaves only three operators in the fray for any fresh auctionsUninor, Sistema and Videocon. Of these, Sistema is in the CDMA space and hardly has any competition.

When the scenario isnt grim and the future not uncertain, it belies logic why the government is further creating a mess by its review and clarificatory petitions and the Presidential reference. The best course would have been to cancel the licences, conduct fresh auctions as fast as possible, and move on. The sector would have been cleaned up.