|Redefining the “Winner’s Curse” (Indian Telecom / QCOM) |
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02/18/2012 | 2 comments
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Just when you thought Indian Telecom finally had a chance to make a clean break from its past, Boom!
Via these two interesting articles in Business Line and Rediff comes along the latest case that seems destined to carry on the unsavory legacy of Indian Telecom regulation.
Firstly, Thomas K. Thomas of Business Line writes that Reliance Industries Limited, the sole winner of pan-India broadband wireless spectrum in last year’s auctions, is requesting that the tenure of its license be increased for another 18 months beyond the original 20 years. Why?
“Qualcomm had won the airwaves during the auction held in 2010 but DoT has not yet awarded the spectrum to the US firm due to issues with its application.
According to RIL, the delay in getting the spectrum has ironically worked out to the benefit of Qualcomm as the US chipmaker will be able to offer services for a longer tenure. RIL has pointed that while its spectrum will be due for renewal in 2030, Qualcomm will be able to offer services beyond that since it is yet to get its licences.”
In October last year we had written about RIL’s plans to build India’s first 4G broadband wireless network. After missing its first launch date of December 28, the late Dhirubhai Ambani’s birthday, RIL had set its sights on launching during the middle of 2012. That date has now been pushed even further, according to the industry chatter (when it comes to RIL and its plans, there’s an unwritten code of “Omerta” followed by all partners) and now stands nearer the end of 2012.
Even then, there doesn’t seem to be any signs of a competitor.
Firstly, Qualcomm is still battling to have its licenses cleared. The Department of Telecom, that beacon of transparency and effectiveness, is foisting demand upon demand of backdated tax claims on Tulip Telecom, one of Qualcomm’s Indian partners in the 4G joint venture. From the Rediff article by Paranjoy Guha Thakurta,
“On November 30, 2011, the DoT raised a demand on Tulip for dues of Rs 146 crore for the assessment years 2009-10 and 2010-11.
A shocked Tulip then filed a representation with the DoT to re-evaluate these demands. Tulip’s argument was that the revenue emanating from its non-licence business had been added to its licence revenues for calculating licence fees.”
“Qualcomm waited for Tulip to settle these issues with the DoT but, after a while, offered to clear Tulip’s dues by giving an undertaking or a bank guarantee to pay in case Tulip did not cough up the money. Qualcomm’s new offer was made through a fresh petition filed on January 23, 2012.
The DoT was supposed to respond to the Qualcomm offer within seven days and discuss the issue on January 31 this year.
The DoT’s counsel informed the TDSAT that he had no instructions and would require more time to reply. The matter to be heard on February 6, when the DoT’s counsel said that he still had no instructions from his client (the DoT) and got an extension till February 13, 2012.
Curiously, on the day of the TDSAT hearing, on February 6, the DoT faxed a fresh demand of Rs 264 crore (Rs 2.64 billion) to Tulip for the financial years 2005-06, 2006-07, 2007-08 and 2009-10. Tulip had presumed that the dispute had been settled for at least three of these four financial years.”
So in the lucrative circles of Delhi and Mumbai – together representing the most profitable and earliest adopters of 4G broadband – Qualcomm is still waiting for spectrum in spite of paying over $1 billion for it. That means Airtel, the current Telecom leader cannot buy those licenses out to offer its own services. Neither can any other operator, because guess what, the DoT has in its infinite wisdom ruled out sharing of 3G (and naturally, 4G) spectrum between operators.
Which rules out the first of RIL’s two possible competitors (three slots of spectrum had been auctioned in most circles, and four in a few).
Meanwhile BSNL, the state-owned operator that was supposed to be the second competitor to RIL, has “returned” its spectrum back to the government. That spectrum is now due for auction, whenever that is.
Which is why its perplexing to see RIL – the only company with 4G wireless spectrum all over India, and an effective monopoly in most lucrative markets – complaining to regulators about how Qualcomm has been given an unfair advantage!
But then, stranger things are known to have happened in Indian Telecom.
Meanwhile, do try to pick up the latest issue of Forbes India from the stands. Aside from the meticulously researched and expansive report on Innovation put together by my colleague Seema Singh, there’s a series of articles put together by me and Forbes India deputy editor Shishir Prasad that argues in favour of a “New Deal” for Indian Telecom just like the original put together under Franklin Roosevelt for America in the 1930's.
Tags: 4G, DoT, Qualcomm, Regulation, RIL, Telecom
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satya February 19, 2012 at 12:51 pm
It is strange to see that after all the 2G scam, DOT is yet to learn lessons. There can be no more preposterous reasons for license extension than the one given by RIL. The Qualcomm issue will further shake the confidence of already jittery foreign investors. I hope the qualcomm issue is sorted out so that there are no further controversies. satya
Paranjoy Guha Thakurta February 18, 2012 at 5:36 pm
Thank you Mr Robin Dharmakumar for quoting the rediff.com article on Qualcomm that I wrote with a professional colleague (who for reasons best known to her chose to remain anonymous). You are indeed correct: there are too many strange things that have happened -- and continue to happen -- in Indian telecom. As if the 2G scam was not enough. Best regards, Paranjoy
Read more: http://forbesindia.com/blog/business-strategy/redefining-the-winners-curse/#ixzz1mq2nA4ol