Telecom industry needs policy certainty: Sunil Mittal

Posted on January 30, 2012. Filed under: Uncategorized |

Sunil Mittal, chairman of Bharti Airtel is at World Economic Forum at Davos. CNBC-TV18's Menaka Doshi caught up with the Indian telecom tycoon to chat with him about the industry and his company .

Mittal says, the telecom industry needs policy certainty. “We have been in a state of flux for the last two-three years. We need policy certainty atleast for the next ten years,” he adds.

Bharti Airtel margins have been under pressure due to high cost of operations. Mittal says, margins will continue to be under pressure. “Higher spectrum charges will add to load of cost of operations,” he adds.

Blow is the edited transcript of his interview on CNBC-TV18. Also watch the accompanying videos.

Q: How hopeful are you that several of the telecom industry policy measures will now soon be put in place and in what form will they be put in place?

A: I have to remain hopeful. Telecom policy 1999 was the last policy. That produced massive growth in this industry. If you would have asked me this question in 1999, I would have said the same thing- we need policy certainty.

I think we have been in a state of flux for the last two-three years. We need policy certainty, whichever way it goes, atleast for the next ten years. So, 2012 should propel us to atleast 2022. In these ten years, we should have one more solid growth, a broadband data that India has never seen before.

Q: What did you get from the minister on three counts, I am guessing these are three issues that you picked up with him, M&A rules, the acquisition of excess spectrum that you all have and 3G issue that you have run into recently which is the intra-circle roaming (ICR) agreements? What did you get from the minister on how these three are likely to evolve between now and the policy being finalised?

A: 3G roaming, from the industry point of view, we strongly believe that it is permissible and that was the understanding at the time of bidding for 3G. Department feels that it's desirable, but not permissible. We are saying that even if we differ on the point of permissibility, a desirable situation, which is good for the nation, must move forward. We are hoping in the new policy should therefore take care of any misunderstandings that may be on this particular point. Until then, we are on the courts and that's where we are on this matter.

Q: If you were assured before the auctions took place that this will be allowed then isn't it now the responsibility of the department and the ministry to come through on those assurances. What is the final outcome on that going to be?

A: I think that's where we are in a dilemma. TRAI recommends not permissible. Department feels it is not permissible. Even though the assurances were given, they feel that the current application of 3G ICR, from their perspective, is a no go.

From our point of view, it is very simple. We asked the question before the bids. If we don't have 3G spectrum in a particular circle, can we intra circle roam with the person who has it? The answer was unambiguously, yes. So, we are perplexed why the department has taken this view. But that will be now decided either through the courts or through the new policy which may actually clarify this issue.

Q: Mr Sibal didn't give you any assurance on that front.

A: Not on this point. On the issue of excess spectrum, I think there is no acquisition of anybody holding excess spectrum. The issue is that charges above 6.2 will need to be decided.

The industry's view is this spectrum that we have got beyond 6.2 in some circles. Let me tell you it's not very much. Most of the people have an average of 8. Most of my circles have got 6.2 and not more, in some we have 8, in some we have 10, so average of about 8. Worldwide averages are about 15-20. In Africa, I have 20-25. So, first of all, this is woefully inadequate spectrum. You want to charge beyond 6.2, that's a debate.

We believe we have the spectrum under the basis of policy. Government has gone on record in parliament, in the TDSAT, in the courts again and again mentioning that the spectrum that was given was part of the policy.

I know there are talks going on whether there should be charges beyond 6.2 and now even beyond 4.4 in some of the discussions. So, we have to see that. Once the policy comes out, we will have to see what our vested rights under the previously allocated spectrum are and how we are going to deal with it.

Q: The two out of three struck out, no certainty on that, absolutely no. I am saying certainty, I mean whether it goes against you or for you, atleast you have this certainty that this is what you have to deal with, which you don't have right now.

A: Correct.

Q: What about M&A rules?

A: The M&A rules, I think TRAI has made a recommendation. That is forward looking, 35% green light and beyond 60% red. That seems to be a sensible policy at par with what you have around the globe.

The only question is will DoT make a liberal M&A policy on one hand, but make it rather unworkable with high charges in terms of what will be the spectrum charge when it's transferred to the entity that is acquiring the spectrum. These are the issues that are again up in the air. These are the discussions we had with the minister and secretary yesterday.

We had appealed to the minister that while deciding these issues, look at the balance between what the government needs as revenue, which is a legitimate aspiration and what the industry can bear. We hoping that there should be some balanced approach, once the decision comes out.

Q: Despite the fact that you have no certainty on all of these issues that we have just discussed, despite the fact that the telecom business in India has been going through flux as you pointed out in the last two-three years, we have a massive corruption case going on with regards to 2G, we have financial performance that's been considerably depressed for the last few years, you still feel that the outlook will be very good. Why do you still continue to think that and put it in the context of Bharti's financial performances you expected to play out over the course of this year and next?

A: It's a matter of economic rationale here. If the government decides, in their wisdom, that this industry needs to be taxed heavily in the form of higher spectrum charges whether it's one time or recurring that has to result in a higher tariff regime.

India has seen the lowest tariffs ever in the history of this world and continues to enjoy this low tariff because the government was pragmatic in the approach of dealing with spectrum and spectrum charges. Now, if the government finally decides, I want higher charges both upfront and ongoing, the result of that has to flow through economic rationale, which will be higher tariffs.

All we want is certainty. If the entire country or the entire telecom sector is going to play at a much higher charge from the government, the tariffs are going to shoot up. So, from my point of view, it's the government's decision, do they want affordable tariffs and money to the government coffers being balanced or not, it's their decision.

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