Yashwant Sinha misses the point; low spectrum rates will help telecom growth

Former Finance Minister Yashwant Sinha is wrong to seek the PM’s intervention to jack up spectrum rates to prevent revenue loss to the exchequer. In the myopic scramble of higher direct revenues from telecom, Sinha misses the simple point that low entry prices and the revenue-sharing model drove India’s telecom revolution.

Slashing the price of spectrum will bring down the cost of communication, leading to faster spread of telecom, which, in turn, would bring in new streams of income. The focus should be on economic gains to be had from the rapid spread of telecom, and the revenues faster growth and higher productivity would yield.

The telecom regulator said in September that high reserve prices drove bidders away in two rounds. Astronomically high prices were set so that no one could accuse the government for doing any favours for industry. Rightly, it led to a rethink on the spectrum price to bring bidders back to the table.

The regulator’s recommendation to slash the base price of spectrum by up to 60% makes eminent sense. Operators should also be allowed to trade in spectrum without tough conditions on the kind of sale that will be permitted, to make auctions attractive.

The telecom sector has been ailing for the last three years, after the uproar over former telecom minister A Raja’s way of allocating 2G spectrum that led to the Supreme Court cancelling 122 licences last year. Operators have a high level of debt on their books, and the rollout has been patchy and expensive.

Slashing the price of spectrum will push operators to lower tariffs and usher in low-cost telecom, helping the spread of education, healthcare, governance and entertainment through low-cost wireless broadband. Internet growth contributes directly to economic growth.

Other value-added services in various sectors need to piggyback on that and, therefore, we need to increase the penetration of mobile phones. The goal should be to achieve high-speed broadband connectivity at the lowest cost, maximising growth and long-term revenues for the government.