 Hello and welcome to NewsClick, today we have with us Poranjay Guha Takuttha an expert on telecom to discuss what has happened on the 2G new auction that is now just taking place. If we look at this final figure which has come 9400 odd crores for the auction, people are saying that it is a flop. And if we look at what is the spectrum that has been sold, it is really about 17% of the total spectrum that Raja had so given away on the first come first serve basis almost at the same price. So why is it being considered as if this has been a whole totally a flop? You are absolutely right Praveer, what is truly amazing is that this so called flop auction appears to be a point on which many people are happy. You hear the union minister, the union minister, finance minister, Mr. Chidambaram, our telecom minister, Mr. Kapil Sibal all are publicly claiming that they are very unhappy that they have not been able to raise the kind of money that they hoped for. But the smile on their face seems to tell a different story, they seem to be more interested in trashing the controller and auditor general of India than trying to really examine what were the real reasons why the 2G auctions flopped. And as you have rightly pointed out, remember in 2008 under Mr. A. Raja's tutelage, the department of telecommunications farmed out 122 licenses and got roughly 9200 crores. And what you have actually sold or auctioned on this occasion is 22, not 122, but you still got more money, that is 9407 crores. Second point, there were no bidders whatsoever for four circles or geographical areas including the two most lucrative circles that is Mumbai, Delhi, Karnataka and Rajasthan. If you compare the reserve price or the floor price of these four telecom circles and compare it with the whole, these four account for more than half of the total reserve price. So the biggest and the most lucrative markets, there were no bidders. Third point, there are 13 telecom companies operating in India at present, including the two public sector companies that Bharat Sanchad Nigam Limited and Mahanagar Telephone Nigam Limited. Only five of these companies participated in the auction. Three of them really didn't have too much of a choice and that's idea, Videocon and what was TeleNor and now is TeleWings. That's because if they had not bid for the licenses which had been cancelled by the Supreme Court, they would literally have had to wind up shop that closed down their business operations here. Of the big players, two really participated, Airtel and Vodafone, but Airtel, the biggest mobile company in India and one of the biggest in the world, bids for one circle, Assam, a C-circle and gives a bid for 8.7 crore. And here's the clincher Praveer. A few days before the auction takes place, Mr. Sunil Bharti Mittal, the head of Bharati Airtel, while addressing the World Economic Forum at a public meeting, says the auction won't last more than a day. How did he know that? There are two separate issues here. One is why did the expected revenue not come through. That is one part. And even if we come to that issue separately, the issue that still remains, as you said, 22 licenses as against 122, in terms of spectrum given, because this time it was also auctioned the spectrum. It doesn't blocks, it is not really a license. You said 17% of the total. Totally 17% of the total. So the remaining spectrum is still there. And don't forget that you excluding from this figure the one time, the fee that you have to pay for excess spectrum. What happens when you reform spectrum? I mean, what is clear that the big cartel that operates, the big five, Airtel, Vodafone, Idea, Tata, Reliance, all have a vested interest in ensuring that spectrum prices do not go up. Why? Reason number one is between December 2014 and middle of 2015, all their licenses become eligible for renewal. They all got them in 94 and 95. These are 20 year license. So they all become eligible for renewal and they want to ensure that prices are low. Secondly for that excess spectrum that one time fee they wanted low. And thirdly, as you yourself know, if Mr. Kapil Sibal has his way and we have national roaming facilities free and that would be great for the consumer, then it doesn't matter whether you are a registered customer in Guwahati or in Kohima or in Gujarat or in Delhi or Mumbai because you can make calls anywhere you want at the same rate. This is a complete disincentive for at least the high license value circles because this provides the whole, as you said, Rome from Rajasthan into Delhi, Rome from Western New Queen to Delhi and you are okay. And you are paying the same price. So it doesn't matter. You are a consumer. It doesn't matter to you. It destroys the whole idea of this home circle. Would you say that? Absolutely. So it's no point then having the country divided into 22 geographical areas called telecom circles. There's one other point I want to mention and this has not been highlighted in adequate detail, the anomalies in the way in which the reserve price or the floor price was fixed. Government is saying that we went by what the telecom regulatory authority of India says. It suits the government to accept the TRAI's recommendation at this juncture where if you look at the last few years there are umpteen occasions where the government is routinely not adhered to the recommendations of the TRAI but in this particular case they are making a virtue out of it and then they say the telecom regulatory authority of India wanted that for a pan India license the base price to be 18,000. We bought it out of 14,000 but look at the anomalies that exist. In terms of revenue generated from second generation electromagnetic spectrum services that the 2G services, the biggest circle is Tamil Nadu. It has 8.75% of the total revenue share. These are official figures of the TRAI. Next comes Delhi 8.41%, third comes Mumbai 7.1%. So Tamil Nadu with 8.75% the reserve price is 307 crores, 306.9 crores to be precise. But in Delhi which has a lower revenue share 8.4% it is 6.94. How do you explain that here is a circle Tamil Nadu with a higher revenue share but the reserve price is less than half 294 vis-a-vis 307 and Mumbai with 7.1% has 678 crores. So clearly this was anomalous and one last point I want to make in this same context. The Supreme Court had very categorically stated that it is the job of the executive that is the bureaucracy, the technocrats to a fix the reserve price for which the auctions would take place and the modus operandi of the auction and such decisions should not be taken by the political leadership. What exactly has happened? It hasn't happened that way just the other way around. The telecom commission which is the highest decision making body in the executive within the bureaucracy does not take a decision. Instead it gives three options A, B and C and asks the political leaders to take a decision. So it's a decision that has been taken first by the EGOM, the Empowered Group of Ministers and then the cabinet. So in a way you actually have not listened to what the Supreme Court has said but subverted what it wanted to say. One issue is of course we'll have to get into why did they do this. But just before we do that if we look also at the two license giving, 122 of Raja and what we are seeing now. At that time the telecom market, the voice market was less than 300 million. It was one third of its present size. Now there are no new voice subscribers coming in so only existing players can get into the market nobody else really can today. What we lost in 2008 that window of opportunity has closed. In 2008 you had a market was poised to boom and it did because between 2008 and 2012 that market went up three fold from 300 million to 900 million. You have about 900 million plus SIM cards or subscriber identity modules in this country even if the actual number of subscribers may be lower maybe 700 million or 750 million. Be that as it may. I think the other important point that you should note in this context is what was the justification that Mr. Raja gave for bringing in these new players these 122 license. And this is the justification of the government. Spectrum licenses are low. Good for the consumer. Tele density goes up. These 122 licensees in this four year period what kind of market share did they get? Did they really be able to generate competition? What six percent? Seven percent of the market? So they were not able to generate the competition because Mr. Raja's justification was that he was going to break the back of a cartel. Now the real crux of the issue. Industry is not interested. It wants to keep the price low because as you said they have two things to lose. One is of course the extra spectrum the hold it will be charged at the auction price. And second their licenses are coming after renewal. They would like the prices to be low. The government has its own interests which you have pointed out that they wanted to use the failure of the auction essentially to say CAG's calculation. Precisely. You are absolutely correct. This was the not so hidden agenda. The government has been deeply embarrassed by the CAG's findings. Not just in the 2G scam but also on Colgate also on the Krishna Godavari gas. And they wanted an opportunity to you know take this to bash Mr. Vinod Rai as if he was the villain of the peace. Because the government's view is that the economic condition of this country is bad and business confidence is low and investors are not coming in. Why? Because of the CAG because of the opposition because of the media. But let's go back to that CAG report. Let's go back to what the CAG had to say in November. The report which was presented in parliament in November 2010. What did it say? The CAG made a set of calculations. It gave four sets of calculation to be precise. The lowest calculation was an amount of 57,666 crore and the highest was 176,645 crore. The three figures were what the offer made by Estelle, what Swan and Etiselat did and what was in the case of the other one was the Unitec and Tellinore. And the biggest amount 176,000 crores was not just the 122 licenses. It included that excess spectrum. It included the dual technology fees. So are we really comparing apples with oranges? Are we comparing mangoes with chikus? The issue is very simple. The CAG was very clear. It said these are presumptive losses. The CAG never said that what was the real loss but the CAG said there is a loss. And this is a notional loss and it's money that the government could have got but did not get. Today the then cabinet secretary, Mr. K. M. Chandrasekhar acknowledged that he himself had written to the prime minister. The then finance secretary, Mr. Subba Rao, who is the governor of the Reserve Bank of India, he says exactly the same thing. The so-called non-paper written by Sindhu Sri Kullar, additional secretary says exactly the same thing. The letter that Mr. Pranab Mukherjee's finance minister puts out says that even after the letters of intent were issued on the 8th of January of 2008, you could still have cancelled. You know, Paranjee, I would like just also to focus on what has happened this auction. Coming back to this auction, even if I take that there has been a failure of the auction, we have got eight times more. Then what we would have got if the same spectrum was given as per Raja's formula. So actually we have got eight times more than what Raja has given. Because you have so far auctioned only as you rightly pointed out, 17% or 18%. And that also the cheapest circles. Correct. That also not the most expensive circles. And only in one circle Bihar was the reserve price exceeded marginally. So if we look at this picture, it no way substantiates the government claim that actually 9,200 crores and 9,400 crores we haven't really got. Precisely. It is for one-eighth of that spectrum. This is at best a half-truth, at worst a lie. It's like comparing, as I said, apples with oranges or mangoes with chikus. Another half-truth that Mr. Kapil Sibal and people like him are saying. He's saying 3G has not happened. That means the 3G auctions were also a flop. People overbid, they don't have the money, they're steeped in debt. That's why they haven't been able to roll out 3G services. But let me say why this is not the full story. This was given in 2010. It's been a little over two years since 3G spectrum was allotted. How long are these licenses for? You are passing a verdict. You want to give a dog a bad name and hang him in two years. What about the remaining 18 years? Are you going to say that in the remaining 18 years 3G will not take off? That brings the second question. That voice has saturated. The data has yet to pick up. Data, as we know, can be used in 2G as well as in 3G. But data market till it picks up. We are not going to see really a change in the economics of the scenario as it exists. It's really confined to existing players and really the voice market. Now if you have saved a huge amount of spectrum, the government only put in the market 48% of the earlier spectrum. It didn't put the full 100% that it gave earlier. Out of which about 50% has been sold, actually 43% has been sold. So we are sitting on 75% of the spectrum. We should not wait for a couple of years before the data market picks up instead of trying to, as they are saying, bringing down the price and selling it again immediately. You are absolutely correct. What you are effectively trying to do is protect a group of five players. The three old incumbents, et al. Vodafone and Aidea, and the two relatively new incumbents, Reliance and Tata. And by ensuring that these spectrum prices remain artificially low, you are like, in a sense, creating, giving them an insurance policy for the future. Would you say the right thing would be to say, don't auction the spectrum if this is the market price. Hold it for another two years. Hold it for another year till the market picks up. That could be one way of looking at it. The timing was wrong. But there's another way of looking. No, I'm not talking about the timing being wrong. I'm saying right now, okay, act one round of auction has taken place. Mr. Sibban is talking about auction very soon again and obviously talking about bringing down the price. No, I'll tell you. The government has already delayed the auction process. The Supreme Court is breathing down its neck. The government had to auction. This time, yes. Right. Why did you listen to the TRAI and if you are willing to bring it down from 18,000 crores to 14,000 crores, what stopped you from bringing it down to 4,000 crores? You wanted also the industry to scream that these are too high. Therefore, we will not participate. This is my opinion and I think it's difficult to say who conspired with whom and who's happy and who's celebrating and who's not happy despite the public claims and counterclaims. All I can argue that there are enough people today in the industry who are more than overjoyed that these 2G spectrum auctions have apparently flopped. And let me suggest that the circumstantial evidence suggests that this was all pre-programmed. I mean, tell me, tell me. How did Mr. Sunil Bharti Mittal know that the auctions would last a day? It just lasted a little over a day. But how would he know? And how would he, as the head of the biggest mobile telephone company in this country, have the gall to say this in public? Thank you very much. Let's see how in the future we can discuss also the issue because that's another interesting case which is proving. Thank you very much. Thank you Praveen. There's a book of mine coming out on this subject. Good. We'll review the book as well as have a discussion. Thanks. Thank you.