The following is the text of Press statement issued at the Press Conference held by the Minister of Communications & IT Thiru A. Raja in New Delhi today:

“There have been several reports in the media and other quarters regarding valuation of new licences and alleged loss to the exchequer.

It is clarified that there has been no deviation in the policy approved by the Cabinet on 31st October 2003 for issuance of new licenses.  The above decision is based on NTP 1999 and supported by TRAI recommendations from time to time.

NTP-99 is the bedrock regarding issuance of licence and allocation of spectrum. NTP 99 in para 3.1.1 says,  

"The entry of more operators in a service area shall be based on the recommendations of the TRAI who will review this as required and no later than every two years.

CMSP operators would be required to pay a one time entry fee.  The basis for determining the entry fee and the basis for selection of additional operators would be recommended by the TRAI.  Apart from the one time entry fee, CMSP operators would also be required to pay licence fee based on a revenue share.  It is proposed that the appropriate level of entry fee and percentage of revenue share arrangement for different service areas would be recommended by TRAI in a time-bound manner, keeping in view the objectives of the New Telecom Policy".

            In addition, the guidelines for Basic Service Licence dated 25.1.2001 in para 26 enunciates the policy of allocation of spectrum on first-come-first-served basis. 

            TRAI in 2003 recommended that   "…entry fee of the fourth Cellular Operator would be the entry fee in the new Unified Access Licensing Region…"  This amount is Rs.1658 crores for a PAN India license. 

In consonance with NTP 99 & TRAI recommendations, the guidelines issued for UAS Licences in 2005 interalia contains in para 19 that "The LICENSEE shall pay spectrum charges in addition to the Licence Fees on revenue share basis…". 

Further Para 37 of Guidelines of UASL 2005 also stipulates the allocation of spectrum to licencees as follows :-

“For wireless operations in SUBSCRIBER access network, the frequencies shall be assigned by WPC Wing of the Department of Telecom from the frequency bands earmarked in the applicable National Frequency Allocation Plan and in coordination with various users.  Initially a cumulative maximum of upto 4.4 MHz + 4.4 MHz shall be allocated in the case of TDMA based system @ 200 KHz per carrier or 30 KHz per carrier or a maximum of 2.5 MHz + 2.5 MHz shall be allocated in the case of CDMA based system @ 1.25 MHz per carrier, on case by case basis subject to availability”.

Subsequently, TRAI has again in August 2007 recommended the following…

"It is therefore recommended that in future all spectrum excluding in 800, 900 and 1800 bands should be auctioned so as to ensure efficient utilisation of this scarce resource.  In the 2G bands (800 MHz/900 MHZ/1800 MHz), the allocation through auction may not be possible as the service providers were allocated spectrum at different times of their license and the amount of spectrum with them varies from 2x4.4 MHz to 2x 10 MHz for GSM technology and 2 x 2.5 MHz to 2 x 5 MHZ in CDMA technology.  Therefore, to decide the cut off after which the spectrum is auctioned will be difficult and might raise the issue of level playing field" (para 2.79).

Further, TRAI also recommended in August, 2007 that "No cap be placed on the number of access service providers in any service area" (para 2.37).

            In addition TRAI also recommended that "Keeping in view the objective of growth, affordability, penetration of wireless services in semi-urban and rural areas, the Authority is not in favour of changing the spectrum fee regime for a new entrant.  Opportunity for equal competition has always been one of the prime principles of the Authority in suggesting a regulatory framework in telecom services.  Any differential treatment to a new entrant vis-à-vis incumbents in the wireless sector will go against the principle of level playing field" (para 2.78).         

These established policy regarding issuance of license, allocation of spectrum and charges thereon have been followed by the successive governments till date.

            Regarding sale of shares by SWAN and UNITECH, it is clarified that the foreign companies have entered into agreement to subscribe to the new equity shares of the Company.  No share of the founding promoters of the companies have been sold.   Hence, the question of windfall gain or for that matter any gain for the promoters does not arise.  In the case of SWAN, Rs. 3500 crores aprox. is proposed to be inducted into the company.  Similarly, in the case of UNITECH,  Rs.6000 crores aprox. shall be inducted by the foreign partners in the company.  This is as per FDI Policy of the Government and these transactions are going to result in infusion of above FDI into the country. 

            These funds in the company will be utilised for the establishment of network including infrastructure.  It is clarified that it is necessary for such licensees to seek technical, managerial and financial support from suitable collaborators in order to successfully comply with license conditions which involves telecommunication operations.  The valuations being quoted are “post-money” – it reflects the value of the funds applied to the business and not the value of the licence or spectrum.

            This matter has been discussed and clarified with the Finance Minister.  In addition, MoC&IT has on 5.11.2008, directed that Telecom Commission may deliberate on the issue of prohibiting sale of equity by promoters.

            Since the introduction of revenue share regime in 1999, the Government has received more than Rs. 50,000 crores on account of only licence fee.  In addition to above Government has received aprox. Rs. 9000 crores on account of spectrum charges and aprox. Rs.19500 crores (Rs. 12500 crores aprox. in 2007-08 alone) on account of entry fee. In 2007-08 alone Government received aprox. Rs. 12,000 crores from licence fee and spectrum charges.  This annual fee has been increasing year after year as subscriber base has been increasing.  Hence, loss of revenue for not resorting to auction is only a myth and is compensated by deferred revenue every year.     

Regarding 3G, in line with TRAI recommendations, Government has already issued guidelines for 3G and BWA services.  These have been shared with the Press on 1st August 2008.   Since then the Government have received suggestions from various sources including media and the Government have issued certain modifications in full consultation and agreement with the Ministry of Finance.  The auctioneer has already been appointed and the auctioning of 3G and BWA spectrum will be completed by January 2009.

Akshay rout/vk