The availability of spectrum was not an issue in the auction, said Telecom Secretary Rakesh Garg. In an exclusive interview to CNBC-TV18's Malvika Jain, Garg said that he is confident that companies will be able to raise debt from the market as banks have faith in them and are ready to lend.'
The government has garnered over Rs 1 lakh crore from the recently-concluded telecom spectrum auction which went on for 19 days and 115 rounds.
The government's aim was not to maximise revenue from spectrum sale, said Garg, adding that the telecom companies have made prudent business decisions. "The auction outcome proves that reserve price was not wrong," he said.
Below is the transcript of Rakesh Garg interview with CNBC-TV18's Malvika Jain
Q: The spectrum auctions have just concluded, the government has garnered Rs 109874 crore from sale of airwaves. However telecom companies – today we interviewed Idea Cellular, we have also been talking to the COAI, Bharti Airtel , Vodafone, all companies are complaining that it was the pressure of continuing their operations that promoted these companies to bid so aggressively and now that they have had to bid so aggressively it is the customer who is going to suffer, the tariffs will have to inevitably go up and going forward network expansion is also something that will slowdown.
A: I don't think this argument is correct. In fact what as a government we can do to ensure that the market is competitive and there is enough supply of the spectrum. What you can see in the present spectrum 67 percent of extra spectrum has been provided for the auctions. The expiring licences were given approximately 35 percent of the spectrum rest of that has come as a fresh spectrum. So, enough spectrum availability has been ensured in the market. So, with that enough availability of the spectrum and now much of it has been picked up. So, the spectrum availability in the market will increase.
If you see the amount of the money which has come through the spectrum auction - this spectrum has been given for 20 years and if you give it for 20 years per annum expenditure is hardly Rs 5300 crore and the turnover of this industry at the moment at the present rate is approximately Rs 2 lakh crore. When it is Rs 2 lakh crore Rs 5000 crore is not much. If you divided with the number of minutes which are being used that moment the whole amount of Rs 5300 crore it comes approximately 1.3 paisa per minute which is hardly any amount.
Q: This is an argument that has been put forth by the telecom minister as well but what telecom companies are saying is that they are going to now have to take more loans and they will come under debt. There is already Bharti Airtel which at the end of March 2014 had a debt burden of Rs 60542 crore. If you see Reliance Communication Rs 41978 crore and Idea and Vodafone also with a debt burden of around Rs 20000 crore. So, it is very difficult for the companies to take a business decision because on one hand it is about continuing their operations and on the other it is about increasing this debt burden. They are saying that this is one of the reasons why tariffs will have to go up.
A: Which industry runs without loans? All the big industries they have to take loan in their businesses. When the banks are give them loans that is based on stringent norms. They will not give loan until the industries are meeting those norms and the banks also do due diligence. All of these industries when you see they have a debt amount but they have debt servicing charges and whatever the debt servicing charges are after paying that thing all of them are in profit they are not making losses.
Once they are making profit and have been conscious and confident that this much of money they can raise from the banks and from the market that is why they have gone for auction. They have made a prudent business decision. I believe that they have faith in the present transparent government and the future telecom growth. Seeing those two things into account they have bid in the same. I am sure that they will be in a position to raise this much of loan from the market and from the banks.
Q: You don't feel that it was the limited availability of spectrum and the pressure on telecom companies to ensure that they must win back spectrum in renewal circles, that prompted the government and enabled the government to raise the kind of revenues that it has?
A: We have made that much of spectrum available that even this spectrum which we have made available, all of that has not been picked up. Even spectrum which was in 900 MHz band and came up for renewal, that too has been lapped up. Many companies have shifted from 900 MHz to 800 MHz and they have taken up 2100 MHz also. So, the availability of spectrum is definitely not an issue and once that is not a issue I don't think companies are going to face problem.
Q: Maximum bidding has taken place in the renewal circles how do you counter that?
A: This is their business decision. They have compared the different spectrum available and they have compared how much they are going to invest in 900 MHz and how much additional investment will be required in other band. Based on that – this is the first time when we have made them available such a big choice. All the spectrum auction has taken place simultaneously. They had a choice all the time throughout the auction to keep on comparing fifeerent bands and buying be it 900, 800 MHz, 1800 MHz or 2100 Mhz. This way their choice was much wider and whatever decision they have made they have made a very prudent decision. I am sure that will do good to them.
Q: While you say that telecom companies have made a prudent business decision a former Telecom Minister Kapil Sibal went a headed and said that the objective of the auction was profit maximisation, revenue maximisation and it was not maximising the customers experience and customers satisfaction. Do you feel that now even though you are saying that tariffs would not go up companies will use this as an opportunity to spike prices and ultimately it is the customer who is going to suffer?
A: What I will say if the government objective would had been to increase the revenue again then why should have they put up so much of new spectrum in all auction. It was not very difficult for us to keep the auction one after another. It was very easy for us not to bring the 21 megahertz from the army. This issue was pending for last 7-8 years the earlier government could not solve it.
In this government ultimately within a period of 3-4 months this matter was solved and we have put it on around the auction. Even the for 800 megahertz and 1,400 megahertz we have put all the spectrum which was available with the government on the auction. The purpose was basically the public should get the maximum possible benefits. For the government the consumer benefit is the biggest thing.
For consumers' benefit it is necessary, the maximum possible spectrum should be used. That is why whatever spectrum was available with the government that was put on the auction.
Q: What about consumer experience, consumers were waiting for roll out of 3G and 4G services. However, if you see the manner in which companies are rolling out 3G and 4G services it is pretty low and most of them are saying that it is simply because the revenues that they are bale to generate from sale of these services even though they are picking up is something that is not up to the mark and particularly 4G services roll out is suffering on account of the manner in which the data service penetration is taking place in the country and also these auctions which happened every year while it is the sources of revenue for the government the companies find it difficult to expand their network?
A: Whenever you have new spectrum there is no other way to give it to the telecom service provider other than the auction. So whenever you are saying auction is taken place every year this means more and more spectrum is being put to the market.
Q: But most of it is… because licences are coming up for renewal.
A: This is this time. But whatever, even this time only 35 percent as I told you was a spectrum which has come out of the RS which are expanding, rest of the spectrum is a new spectrum. So, this new spectrum coming in the market, definitely things are going to become better. And the biggest thing which has happened which people are not probably giving that much of attention. Whatever the 900 mhz has comes for the auction, this was earlier can be used only for the 2G services. Now this spectrum is liberalised spectrum, this can be used for 3G services, this can be used for LTE services and I am sure these companies will be putting it to better use through 3G and LTE services. And definitely the customer is going to get advantage of that.
Q: Do you think the government's Digital India mission in any manner would get impacted because of the outcomes of these spectrum auctions? Even before the auctions actually kick started you have CEOs of the telecom companies including Marten Pieters from Vodafone saying that the high reserve price will eventually lead to a high market discovered price. And this is going to impact the Digital India mission of the government.
A: The reserve price is important only whenever the things are going only at reserve price. But whenever after the reserve price, when the market is open for the competition, so when it is open, then they discover their own price and in most of the cases, out of the 61 offerings which have been taken up. more than 50 offerings have gone above the reserve price. And if they have gone above the reserve price, the reserve price becomes meaningless there in the sense that is not any bearing on the market discovered price. Market discovered its own price. In different band in different places, different kind of increase has taken over the reserve price. So, I do not think that the price was very high. In fact this auction, this auction has proved that our reserved price calculations was not wrong. They were right.
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