DoT to clean muddy regulatory waters

13 Nov 2014

India’s Department of Telecommunications (DoT) has been instructed by telecom minister Ravi Shankar Prasad to provide clarity on a number of issues persistently harming investor confidence in the sector, the Economic Times writes, citing a senior DoT official. Matters including spectrum sharing and trading, terms for mergers and acquisitions and the rationalisation for penalties are all set to be considered by the DoT. Whilst the minister is keen to clear up some of the sector’s muddier regulatory waters, the DoT’s deliberations will not delay the upcoming spectrum auction, scheduled for February 2015, despite calls from the industry to put the sale on hold until more frequencies are available. According to the DoT official guidelines on spectrum sharing are already in the works but the regulator has yet to look into spectrum trading, so guidelines on those two areas are unlikely to be released by the end of 2014, as previously stated by Mr Prasad.

Meanwhile, contentious elements of the existing merger and acquisition rules will be reconsidered, including the requirement for the buyer to pay the government a market-linked price for the frequencies changing hands. Although not highlighted by the official, in the wake of the failure of Bharti Airtel’s takeover of Loop Mobile, the DoT is also expected to consider M&A norms alongside the rules for mobile number portability (MNP). The takeover was delayed by, amongst other things, opposition from the Telecom Regulatory Authority of India (TRAI), which claimed that the transfer of customers from Loop to Airtel violated the rules for MNP. Clarity on M&A rules is one of the highest priorities for the sector, as many of the nation’s larger operators are increasingly looking towards consolidation in the crowded market.

Elsewhere, telcos have been clamouring for the DoT to impose a graded penalty system that will determine the levels of fines based on the severity of an operator’s transgression. Having come under greater scrutiny from other government agencies after the 2G crisis shed light on corruption in the department, DoT officials have levied maximum penalties on telcos for infringements, lest any leniency be taken as graft. The Economic Times pegs the amount owed in penalties by the nation’s telcos to be in the region of INR21.17 billion (USD344.3 million), most of which is currently being disputed in the courts: as noted by TeleGeography’s GlobalComms Database, INR11.33 billion worth of fines were dished out in the 2011-2012 year, but the amount collected was just INR2.06 billion, equating to around 18.2% of the total. Subsequent years have yielded similarly poor results, with the DoT realising 15.0% of the INR7.19 billion levied in 2012-2013 and 1.6% of the INR79.23 billion charged in 2013-2014.