TRAI Calls for Urgent Modification; India’s unmovable Stake

Bundles

The Telecom Regulatory Authority of India (TRAI) has recently submitted a Consultation Paper (CP) to discuss issues relating to the poor broadband penetration in the country and to solicit stakeholders’ views. It shared actions that are required to be taken both by the government and service providers to accelerate the proliferation and use of broadband services in India. The survey reported that 97% of the subscribers in the country is owned by 10 service providers, in which 83% of the market share belongs to the top five providers.

Despite certain amendments in the TRAI Act since April 2004, the Act has worked only in favour of the bigger service providers, such as the state-owned providers BSNL and MTNL. The survey showed little or no presence of small private owned service providers in the telecom radar. According to the report, the situation is crucial because BSNL and MTNL together have about 74.9% market share for wire-line broadband and 30.5% for overall broadband subscriptions.

3_1TRAI’s objective is to create and build a smooth operating system, provide a fair and transparent environment and facilitate fair competition. However, in the current scenario, there is clearly no sign of equal distribution under its umbrella. In a recent meeting, Rahul Khullar, TRAI chairman said, “I think the industry is in dire need of consolidation. It simply just cannot carry on like this with 10-12 operators, some of them bleeding to death, and it has to stop.” His statement is also against what TRAI has proposed and targeted, and what it has achieved as of March 2014.

It has targeted to provide affordable and reliable broadband-on-demand by the year 2015 and to achieve 175 million broadband connections by the year 2017. Further, it planned to provide 600 million broadband connections by the year 2020, with at a minimum of 2 Mbps download speed and making available higher speeds of at least 100 Mbps on demand. But it is reported that under the existing license, there are only 60.87 million connections – as reported by 121 service providers, a shortfall of almost 35 percent, and certainly nowhere close to meeting its target. original

In the same meeting, Khullar further added that the industry is in danger and needs immediate modification to tackle the slow growth. Also, most operators are not happy with the new M&A rule though it raised the market share from 35% to 50%. There is a debatable clause; buyers are required to pay market-linked prices for spectrum that comes with any acquisition, which is why deals are not settled as it raised the cost of acquisition. The survey also reported that smaller operators are running up to thousands of crores of debt and no consolidation has happened. Also, for the last six months, the former UPA government has asked the current government for the revised M&A rules, but so far no action has been taken.

It has been long since the telecom operators have demanded an alteration in the M&A rules. Recently, Vodafone India chief, Marten Pieters said, “We (would) love to buy 3G spectrum. But I can’t! It’s because it comes with all kinds of stuff I don’t want because I have it all. So, it is very difficult to make an attractive proposition in such a situation.” In November 2008, TRAI had submitted certain recommendations on barring entry of certain parties and entities, but the government has clearly ignored the proposal.

But on one hand, the reserve price for 900 MHz in the forthcoming spectrum auction should be same as that for the 800 MHz band used by CDMA players, confirmed GSM operators because both the bands have similar propagation characteristics. Bharti Airtel said, “We propose that the reserve price of 800 MHz band as finally accepted by the government based on the TRAI’s recommendations dated February 2014 shall be used for 900 MHz band also.” Vodafone India further added, “The coverage in 900 MHz is roughly double in 1800 MHz. The reduction in capital and operational expenditure could be as much as 40%. Operations in the 800 MHz band enjoy similar advantages.” And on the other hand, the good news is by the end of 2014, the government is likely to have a new sharing and trading rules to accommodate privately owned providers in the business.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s