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Developments in The Telecom Sector, Award of 2G Licenses in 2007-08 and Subsequent Observations of Audit
Developments in The Telecom Sector, Award of 2G Licenses in 2007-08 and Subsequent Observations of Audit
Policy Perspectives
Status Report
Scheme of Presentation
1. Initial developments; New (NTP),1999 and its impact Telecom Policy
2.
5. Conclusions
Scheme of Presentation
1. Initial developments; New (NTP),1999 and its impact Telecom Policy
2.
5. Conclusions
Scheme of Presentation
1. Initial developments; New (NTP),1999 and its impact Telecom Policy
2.
5. Conclusions
Scheme of Presentation
1. Initial developments; New (NTP),1999 and its impact Telecom Policy
2.
5. Conclusions
10
13
Scheme of Presentation
1. Initial developments; New (NTP),1999 and its impact Telecom Policy
2.
5. Conclusions
14
Presumptive licenses
Category S Tel rate 38,950 14,573
loss
on
award
of
` Crore
Criteria for working out potential loss to exchequer Rates on the basis of 3G auction 1,02,498* 37,154** Sale of equity by the new licensees Unitech 40,442 15,132 Swan 33,230 12,433
New licenses Dual technology licenses Beyond contracted quantity of 6.2 MHz Total
13,841
36,993#
14,052
12,003
67,364
1,76,645
69,626
57,666
Presumptive loss to be estimated against 4.4 MHz (instead of 6.2 MHz) allotted to new licensees. ** Presumptive loss to be estimated against 4.4 MHz (instead of 5 MHz) allotted to dual technology licensees. # Presumptive loss against Spectrum beyond 6.2 MHz not to be considered as the allotment of additional spectrum (post January 17, 2008) is subject to pricing as determined in future for spectrum beyond 6.2 MHz. Decision to be 15 taken after TRAIs recommendations which are presently awaited after TRAIs *
on
award
of
Observations on Presumptive loss based on 3G prices: UAS licenses issued in January 2008 and 3G payments made in May, 2010., therefore, 3G prices have to be discounted to reflect time value of money. Economic value of spectrum a function of subscriber base and ARPU. While subscriber base increased 3 times, ARPU reduced by 66%. 2G spectrum was subject to availability. On average, allottees of 2008 (and even earlier) have received spectrum after a gap of a year, therefore 2G spectrum is available on an average for 19 years instead of 20 years.. There is difference in spectral efficiency of 2G and 3G spectrum: 5 MHz of 2G and 3G spectrum have spectral efficiencies of 40.61 Erlangs and 149.1 Erlangs respectively, i.e., in the ratio of 1:3/4. While computing the pro-rata value for 4.4 MHz spectrum vis--vis 6.2 MHz, the non-linear advantage due to consolidation of holding 6.2 MHz over 4.4 MHz needs consideration.
16
on
award
of
Observations on Presumptive loss based on 3G prices -----<II>: Telecom sector policy has evolved continuously since 1999 and is predicated on the following pillars: increase in teledensity and affordability to the consumer; creation of a competitive environment, with level playing field between existing and new incumbents; and, revenue accrual to Government both through one time fee and annual recurring charges. The policy evolved through NTP, 1999; 1999 migration package for existing operators; development policies followed between 1999 and 2004; and, the overarching vision articulated through the X FYP. The policy created a historical legacy, once it was decided to allow induction of new operators in the UAS regime on the basis of 2001 entry fee. TRAI, the sector regulator, has recommended for induction of more players at low entry charges, in its successive recommendations of October/November, 2003; January/May, 2005; August, 2007; and, May, 2010.
17
on
award
of
Observations on Presumptive loss based on 3G prices -----<III>: The policy has met with spectacular success, in terms of increase in teledensity and subscriber base; reduction in call rates; and, boosting economic growth. Development policies pursued between 1999 and 2004 had significany financial implications. o However duopoly regime was ended and additional operators were introduced. o This resulted in direct benefit to the consumers over ` 1,00,000 crore per annum, as a result of ARPU drop between September, 2007 and May, 2010). 3G auction has a different context. There were no historical legacy issues, hence no issues of level playing field arose. Moreover, auction of 3G spectrum was a consistent recommendation of TRAI, in its successive reports of September, 2006; August, 2007; and May, 2010. 18 If the TRAI recommendation of May, 2010 (on the basis of which the
on
award
of
Observations on Presumptive loss based on Offer of S Tel Ltd.: The offer was conditional and untenable, since it pertained to 6.2 MHz spectrum in the 900 MHz band, in all 22 service areas which was not available. The company also asked for permission for active infrastructure sharing whereas sharing of spectrum is not permitted under the current UAS regime. The offer was subsequently withdrawn by the company and this was stated in its affidavit before the Supreme Court of India. The amount offered (` 13,752 crore) was spread over 10 years, with the first year offer being only ` 250 crore. The company could have reneged on its commitment after being allotted spectrum at 1/5th of its extant price. There is no provision in the licensing regime to offer spectrum on the basis of conditional offers.
19
20
Scheme of Presentation
1. Initial developments; New (NTP),1999 and its impact Telecom Policy
2.
5. Conclusions
21
Conclusion..
The policy matrix which led to the issue of UAS licenses in 2008 evolved over a period of time, through NTP, 1999; decision of the Union Cabinet, dated October 31, 2003; practice adopted by successive Ministers for grant of UAS licenses; and, successive TRAI recommendations of 2003, 2005 and 2007. The policy has met with unqualified success and has propelled India into the fastest growth telecom market worldwide. The issue of deficiencies, if any, in translating policy into procedure and procedure into actions, are being looked in to by the One Man Committee set up by DoT and Investigating Agencies. Appropriate action will be taken based on the findings.
22
BENEFITS REALISED
1.
1.
a)
b) c)
DIRECT CONSUMER BENEFITS Indian customers have benefitted by Worlds lowest tariffs (Fallen from Rs 32 /min to Rs 0.30 /Min) due intense competition (Benefit to Aam Aadmi : Over1,00,000 Cr/year) Citizen connectivity and empowerment, which cannot be estimated in value terms. RAPID GROWTH IN INDIAN TELECOM MARKET Due to the Policies, favoring promotion of Telecom Sector over revenue generation, Indian Telecom Market has become Worlds fastest growing market, with subscriber addition of 16-18 million/month, ahead of Chinas 8Million/month) and Worlds second largest Telecom Market, after China. Since 2005, Indian subscribers have thus grown from 9.83Cr to 74.21Cr (Oct 2010) and similarly, Tele-density has grown from 8.95% to 62.51%), empowering masses. SPIN OFF BENEFITS TO ECONOMY: Huge indirect gain from impact on GDP Growth Rate High Service Tax accruals (30% of total Service collections coming from Telecom sector alone) Huge investments by Telecom Service providers and Manufacturers. Indian Telecom has turned out to be third biggest recipient sector of FDI and has attracted more than US 10 Billion $ since 2000) Network externalities like facilitation and productivity enhancements in Trade, industry and commerce
2.
d)
2.
3.
23
Thank You
24
7.00
1200
1113
6.00
Subscriber / ARPU
1000
4.99 884
5.00
4.06 634
600
2.82 469 394 340 1.55 1.15 0.79 13 33.69 52.22 272 165.11 0.58 261.07 237 177 391.76
584.32
635.5
3.00
400
2.00
200
1.9 3.58 6.54
1.00
121 114 0.30
90.14
0.52
0.39
0.31
0.00
Total Subscriber(Million)
ARPU(Rs/Subscriber/Month)
25
Tariff
800
4.00