The story of the Indian telecom sector in the last 10 years has been marked with controversies and growth. It will not be an exaggeration to say that both have gone hand in hand ? even though the decade has been full of controversies at regular intervals, the Indian telecom sector only went on to become stronger to finally emerge as the fastest growing market in the world.
No wonder at a time when the country?s telecom subscriber base has crossed the 700-million mark with additions of 15-20 million users every month, the sector is rocked by one of the biggest scams the country has seen so far ? the Rs 1.76 lakh crore 2G spectrum scam. The telecom minister at the centre of the scam, A Raja has already resigned and is being grilled by the Central Bureau of Investigation while a new minister, Kapil Sibal tries to put the sector back on rails.
If the current developments in the telecom sector disappoints observers, they should rewind to the year 2000 when fresh with the National Telecom Policy, 1999 operators were looking at a future devoid of any skirmish which only promised growth.
After all their much sought for demand ? replacing fixed licence fees with revenue-share had been met. That hope was not to stay for long. In 2001, the then telecom minister Ram Vilas Paswan allowed the wireless in local loop policy, which basically allowed fixed line service providers to offer limited mobility services.
The facility saw operators like Reliance Infocomm providing full mobility services which was heavily resented by the existing GSM operators who viewed it as nothing but backdoor entry into mobile services by those who had paid lower licence fee. The next few years saw a pitched battle between the CDMA (the WLL operators were using the CDMA technology) and the GSM operators, at various levels ? policy-making, courts and the media. Even as the battle raged a silver lining emerged. With the entry of newer players, mobile tariffs started declining. This was something which changed the entire mobile landscape as it was defined and seen till then. Right from its beginning in 1995, mobile phones were seen as a luxury item to be used by the affluent. Call rates were as high as Rs 16 per minute during peak hours and Rs 8 per minute during off-peak hours. Calling party pays regime had not come into effect and one had to pay for receiving calls on mobile as well. All this had ensured that growth was minimal and not a single telecom firm was profitable having sunk in huge sums as investments. It was Arun Shourie who as telecom minister in 2003 resolved the CDMA-GSM row by bringing in what is now called unified access service licence (UASL), which ended the distinction between fixed line and mobile licences. The unlimited mobility players were asked to provide fully mobile services on legal terms by paying the licence fee the GSM operators had paid and firms like Reliance Infocomm had to pay a penalty over and above that for crossing the threshold of limited mobile services.
To be fair it, was Reliance Infocomm’s entry which saw the real growth of mobile telephony as it was the first operator to have spurred a tariff war with lower call rates, a mass campaign defining mobile phones connecting the aam aadmi, and making the phones available for as little as Rs 500.
With UASL, the controversy on the policy-side settled and what began was an era of growth ? rising subscriber numbers, telecom companies turning profitable, soaring valuations and with the government allowing up to 74% FDI, almost all foreign telecom majors setting up shop in the country. UK?s Vodafone Plc, the world?s biggest telecom firm by revenues entered India in 2007 buying Hutchison’s 67% in Hutch-Essar for a mind boggling $11 billion dollar. If there was a shining symbol of success of liberalisation-privatisation it was the telecom sector. However, as growth came the fight shifted from the policy field to the basic raw material which would have fuelled the growth ? spectrum ? radio waves on which mobile signals travel. With 6-7 operators in the market fighting for subscribers spectrum became scarce and the competition bloody. This was best reflected when earlier this year the government auctioned spectrum for 3G and wireless broadband operators coughed up a mind-boggling sum of Rs 1.76 lakh crore making the government laugh its way to the banks.
It was against this background of a spectrum crunch and soaring valuations that Raja committed the blunder of inducting newer players in January 2008 at cheap rates and breaking probably every rule in the rule book.