Telecom Industry biggest revenue generator in the country; Uncertainty harming the sector: Kapil Sibal

He occupies what is probably the hottest of all ministerial portfolios – the telecom ministry. Parachuted into the hot seat following the ouster of A Raja, Congress MP and one of the government’s key trouble-shooters, Kapil Sibal, has a tough job on his hand. Between trying to restore credibility to his post and bringing back the gloss to a sector long regarded as one of the biggest successes of liberalisation, this hot-shot lawyer finds himself boxed in by an assertive judiciary, aggressive media, adverse perception, overzealous investigators and an industry in the midst of a fratricidal war. Sibal tells ET’s Rohini Singh and Joji Philip Thomas that all these are hobbling the sector. Excerpts:

The telecom sector was considered a poster-child of the success of liberalisation. Today its reputation is in tatters. How do you get things back on track?

We are in a slump, there is no doubt. And we are in a slump because of several factors, most of all, perception. People perceive this as a sector that is a source of corruption and in the context of the court cases going on. And, in the context of the fact that we have no decision on the 122 licenses that are still in a limbo. Banks are worried to lend to these telecom operators without knowing what will be the fate of all these licenses. So it is a combination of all these factors that has led to a negative perception. (But) in the long term, it is a sector which will deliver.

Currently, there is an element of uncertainty in the sector. What is your view on all that has been happening in the sector for the past six months?

We are not clear on the fate of 122 licenses, we are still awaiting the court’s judgment. This element of uncertainty is really harming the sector because the more uncertainty there is in the public mind and the mind of banks and financial institutions and the operators themselves, there is less opportunity for investment. The problem is we don’t know what the Supreme Court will do. There is a PIL (public interest litigation) that has been filed which is asking for much more. What issues the court will take into account, what issues they will rule, we don’t know. We are really very concerned at this point of time because the more uncertainty there is for the sector, the worse it is for the economy. This is the second biggest earner in the country in terms of revenue.

TRAI has been asking for licenses to be cancelled for those firms that have not met their roll out obligations.

The regulator has given its opinion a few days ago and we will take a call on those things. But having done that, what happens to the others? And what happens to those we clear? We still don’t know what the SC will do, so that element of uncertainty will continue.

The CBI has pressed charges against promoters of Unitech and Swan (now Etisalat-DB). The CBI believe that their licenses were acquired fraudulently. What is DoT's view on the validity of the licenses especially given that substantial FDI has flowed into both companies?

We have to consider all these issues. After all there are consumers on those networks. So what happens to them? With mobile number portability they can go to other networks, but there is also the issue of investments. So what happens to those investments? Should we auction spectrum again? Will we get the kind of price we got in 2007-08, we don’t know? The market reacts to an existing situation. People talk about 3G prices, but if we were to auction 3G again, will we get the same price? It is very difficult to assess what will happen.

But will you delink the fate of these companies from the fate of their promoters?

We can’t have a solution because even on that we don’t know what the SC will do.

Starting with the whole 2G controversy and the way it has played out, it appears as if the telecom industry is in the middle of a war? Your thoughts.

Without any doubt. The consequences of that war are clear to everybody. Because the industry is at war with itself and because they are trying to destroy each other, the consequences are that we are destroying the hen that lays the golden eggs. The other thing is that the industry does not speak with one voice, it does not have a platform to speak with one voice. And I am sorry to say that the reason for that is each one of them had at some stage or the other sought favours from the government. All of them. Who has ever paid for spectrum, I would like to know? Right from 2002. Who has ever paid for 4.4 MHz? Or 6.2 or up to 8 MHz? Nobody has paid for it. It’s all linked to your market share and what revenues you have. So nobody has paid for it, so what is this posture about morals by one player versus another when nobody has paid for it. The only thing they paid for is entry fee. When you talk about spectrum value you then have to prognosticate what are the kind of profits you will earn over a period of 20 years and then determine the value of spectrum. So the argument that you paid Rs 1,658 crore at one stage and you should have paid more doesn’t take into account the value of spectrum over a period of 20 years. This is all very specious. But yes, we need to delink the license from the spectrum and that is what we have decided to do. The other thing that needs to be taken note of is that spectrum is like a highway. The more people that travel on the highway, the larger the toll. The larger the toll, the larger the revenues for the government. And larger the traffic, the lesser the toll, right? In the interest of the consumers and the nation, you want everyone on the highway. Polices should be such that every resident of India should have access to information. They should all be on the highway. And therefore you must take into account the accessibility and affordability. If you start talking about auctions as a sacrosanct policy not to be ever deviated from, you will never be able to achieve the purpose that I am talking about.

So revenue maximization cannot be the only objective of spectrum?

It cannot be. That’s why the policy was right as enunciated way back in 2002. It doesn’t mean that revenue is totally irrelevant, but revenue maximization cannot be the only objective.

What is the DoT's view on the validity of Loop's licenses? Does it believe that Loop is an 'associate' of Essar?

Matters are being decided. All this is being looked into by various authorities including the CBI. So I don’t want to queer the pitch by making a comment.

Are ministries wary of the CBI? Nobody is ready to give an opinion on matters that are being investigated by the CBI.

Everybody is fearful. Nobody wants to get involved with the CBI. You cannot run an industry under threat of Tihar jail. No economy can flourish. (There is) this clamour... that every ministry is corrupt, every minister is corrupt, every institution is corrupt. If you have this kind of clamour continuing, you cannot have economic growth. Which sector will grow?

Since you are a prominent lawyer, what is your view of the courts not granting bail to the 2G accused?

You see what happens in situations like this we all get carried away by public opinion. And the function of the judge is always to rise above public opinion. Otherwise the rule of law is unsafe. Now we leave it to the judiciary because a very delicate constitutional balance that is part of our constitutional framework should not be disturbed. So my worry is that on occasions we seem to be overreaching and institutions have to be careful about it. I am seeing democracy being hurt very badly. I don’t want to blame anybody. I think the executive has not only underperformed, but there are issues of corruption we have to deal with. I think the legislature has also underperformed - we are seeing the paralysis in legislative functioning, which is an anathema to growth. We are seeing a judiciary that is overperforming. And we are seeing a media that is entirely irresponsible. I think it is the duty of the media to bring to book those who commit crimes, but that must be based on hard evidence. The generalization that occurs based on specific instances is very harmful to India’s perception within as well as abroad. I have the greatest respect for the media and I will stand up at any time to fight for its independence, but independence cannot be misunderstood for recklessness. Independence comes with a certain responsibility. We say the judiciary is independent, but the more independent you are, the more responsible you have to be. The media somehow has not struck a balance between independence and responsibility, which is the hallmark of true independence. This is a problem. More so, the electronic media, and not so much the print media.

What about 2G spectrum allocation for existing operators? Recently it has been revealed that the DoT has enough 2G spectrum.

We need to have a policy framework on which we can do it. We can’t do it on an ad hoc, sporadic manner. Everything we have to do through an institutional mechanism, with a certain policy framework. We are looking at more spectrum. At the moment the policy decision is that we will delink the license from the spectrum. That’s the DoT’s policy. So the issue is what will be the pricing mechanism? There has to be a market-based mechanism, so the Telecom Commission has to decide that. The other issue is what will be the M&A policy? I don’t think any particular circle with 12-13 operators can sustain itself, so there is an issue of sustainability. Therefore, the M&A policy also has to be rational to allow those M&As to take place seamlessly without any bureaucratic hiccups. At the same time, we need a minimum number of competitors to ensure that competition is alive and the big fish do not swallow the small fish.

The finance ministry wants the DoT to hold spectrum auctions this fiscal year. It has said that at least one block of wireless broadband spectrum should be auctioned.

Let the new policy be put in place by October and then we will take a call on having auctions.

In the last few weeks, operators have raised call. Do you think the days of rock bottom prices are over and tariff hikes are inevitable?

That is why we need an M&A policy. It is not possible to have 12-14 operators in a region. But I am not a marketer and do not want to comment on the tariffs of companies.