"Telecom firms should offer equity stake to government if bailed out"

Even as the telecom sector is going through its worst phase ever in its short history as a liberalised sector, private operators are stil...

Even as the telecom sector is going through its worst phase ever in its short history as a liberalised sector, private operators are still to come up with ideas to resolve issues and find a way to inject vibrancy in the sector. Raju Patel, President of the Association of Basic Telecom Operators (ABTO), spoke to NAVIKA KUMAR on the complex issues plaguing the telecom sector. Patel is also CEO of Hughes Ispat Limited, which is the second private basic service provider in Maharashtra and is poised to give the public sector MTNL a run for its money in Mumbai.

Why are private companies in the telecom sector so wary of the government, especially the Department of Telecommunications (DoT)? What has changed in the last three years to transform this sector from a sunrise to a sunset one?

The basic problem in the telecom sector has been the fact that the government has not recognised that the market response, on the basis of which companies had bid huge licence fees, has not kept up with expectations.Given this scenario, the government has not taken any measures to address these issues. If they so much as said that this is a short-term problem and in the long run things would begin to look up, operators would have something to fall back on. Further, the government should announce a policy for the short-term, specifically to address these problems. After all, the telecom sector is a key infrastructure sector and neglecting it will not help the government’s cause at all.

The basic problem that any government will have is giving concessions by way of writing off licence fees and converting it into a revenue sharing arrangement. Do you have any ideas on what the industry could suggest as a price’ for a bail-out package?

If the government agrees, a way out can be found between private companies and the government. I agree that in a democracy and the government being answerable to the Parliament, it may be difficult for the government to justify any writing off of licence fees. May be companies shouldallow the government a stake in their equity in return for a bail-out package. This would answer critics of the bail-out package by giving the government a share in the fortunes of the company when it is on the upswing. The point is that the government has to sit together with the industry and speak out its mind. If they have to give any concessions, what would they want in return from the industry. Only this way, we can find any solutions. If they continue to stick to their point and we continue to cry about our fate, there will be no solution to the existing imbroglio.

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The collective bargaining on licence fees that all private telecom operators are doing — right from cellular, basic and metro cellular — has irked the government somewhat. Do you think this cartelisation in demanding concessions from the government is fair?

There is no question of any bargaining with the government. The entire industry has some common problems for which we have been talking from a common platform. These include therole of the Telecom Regulatory Authority of India (TRAI), interconnection and a difference in treatment between licences for metros and those for circles. Since all these problems are common, obviously we address the issues together. There are some individual problems as well and we have been discussing these separately with the government. I am a telecom company first and Hughes Ispat second.

Do you concede that the problems of the basic service operators are quite different from that of the cellular operators and that combining the issues would lead you nowhere. In fact, it is learnt that as the ABTO president, you have refused to join ranks with cellular operators on the recent government demand to pay up 20 per cent of the outstandings by February 15.

Yes. It is true that we in the basic service sector have a separate set of problems than the cellular operators. Our basic licence contract stands violated as a result of the government’s new internet policy. In our contracts, we had the exclusiverights to enter the premises of individual customers by laying cables. Now the Internet Service Providers (ISPs) will also do the same, and the best thing is that internet can be used for telephony also. So this directly eats into our rights. The government in its ISP licence has merely said that “voice over internet is banned” and it would like to believe that because it is banned it will not happen. This is not a realistic view and therefore the government should address our problems.

What do you think will happen on February 15?

I think that the deadline given by the DoT is extremely autocratic. After all, no company will have the kind of money required to meet the 20 per cent dues figure, unless the the banks lend them this money. And for the banks to forward this kind of money, the government should do something to make projects more attractive. For example, some cellular companies have seeked permission to set up PCOs. The government can discuss this with the basic operators who may beaffected by this move, adjust their licence fee lower and at least allow rural areas to get telecom services instead of just blockading everything.