Rahul Khullar, chairman of TRAI, believes the upcoming spectrum auctions in January will demonstrate that the government can conduct auctions impartially and get needed spectrum to operators. While the Ministry went against TRAI's original recommendation to lower reserve prices in some circles, Khullar thinks the reserve prices will still induce bidding. Several factors make this auction different than past auctions, including more realistic prices, improved industry conditions, and large amount of spectrum available. Khullar is also optimistic that recent regulatory changes around M&A guidelines and efforts to increase spectrum availability will lead to a healthier telecom industry overall by improving quality of service and allowing companies to grow revenues faster than costs.

1. By
Ashish Barapatre
(13034)

2. ‘WE SEE A SILVER LINING FOR TELECOM’
TRAI CHAIRMAN ‘RAHUL KHULLAR’ TALKS ABOUT THE REGULATOR’S
ROLE IN THE FORTHCOMING SPECTRUM AUCTIONS AND HOW THE
WORST IS OVER FOR THE TELECOM INDUSTRY
(INTERVIEW BY ANJULI BHARGAVA
DATE : 24 DEC 2013)

3. INTRODUCTION
• January is a big month for the telecommunications industry. Spectrum
auctions are expected to fetch between Rs 14,000 and Rs 40,000 crore.
• For the industry, the auctions are critical as the operators need to keep
their mobile services going (most of the old licences expire in 2014).
• For the government, they will serve as proof that it can raise the
targeted amount and hold the auctions in a way that restores the
credibility of the system.
• An interview with Business world, Rahul Khullar, chairman of the
Telecom Regulatory Authority of India (Trai), spoke about the
upcoming auctions, the state of the industry and other issues.

4. QUESTIONS
HOW MUCH IS THE GOVERNMENT LIKELY TO
RAISE FROM THE JANUARY AUCTIONS ?
“How much the government finally realises is not the point. It is
important to demonstrate that the government or the executive
branch can take a judicious decision on a reserve price based on
the recommendations of the regulator, conduct an impartial
auction, and get the spectrum out. That is what is important”.

5. WHY DID THE MINISTRY GO AGAINST
YOUR ORIGINAL RECOMMENDATION ON
PRICES?
• We had worked out the valuation of spectrum and then
suggested reducing the value by 20 per cent to arrive at a
reserve price.
• The Telecom Commission (TC) said metro and A circles
are “very high value”; so, the TC accepted Trai’s valuation
and reserve prices on everything else, but in the case of
metro and A circles, the TC will set the price at exactly the
valuations determined by Trai that is, without a 20 per
cent reduction.

6. DO YOU THINK THIS IS FAIR?
• My own sense it should work out fine.
• Reserve prices should induce bidding so that additional spectrum
becomes available to the industry. Also, given that such a large
quantum of spectrum is being put up for auction, long-term players
would be foolish not to seize the opportunity now; you may not get
another shot at spectrum for the next 20 years.

7. SO, WHAT WOULD YOU SAY ARE SOME OF THE
DIFFERENCES BETWEEN THE LAST AUCTIONS
AND THIS TIME AROUND?
• Three things have happened.
• First, the prices set for the last auctions were unrealistic and did not
elicit a demand.
• Second, economic conditions have changed drastically. In November
2012, we were in bad shape. It was even worse shape by March 2013.
• Third the health of some of the telecom companies — even as the
overall economy has worsened — has actually improved, although
some are still in distress

8. WHAT ABOUT THE NEW MERGER AND
ACQUISITION GUIDELINES?
• In a circle, even if one player has 50 per cent market share, we are
willing to live with it. Earlier, the ceiling was 40 per cent, which
essentially prevented anyone from taking over a company. People are
arguing that it will still not help but I think things have been made
easier

9. SO, ALL THESE STEPS WILL MAKE FOR
A HEALTHIER INDUSTRY?
• Yes. The idea is to increase availability of spectrum. This will
improve quality of service. If we can sell spectrum at a reasonable
auction-determined price, where the players don’t sink under the
burden of debt, we will help the industry turn around.
• As they start rolling out more services, their topline will grow faster
than their costs.
• Please note: there is currently Rs 2 lakh crore of debt that has to
be paid back.
• We finally see a silver lining for the industry.

10. WHY IS THE BROADCAST MEDIA SO UPSET
WITH YOU? AND WHAT WILL HAPPEN TO
THE 12-MINUTE ADVERTISING CAP
EVENTUALLY?
• In May 2012, Trai issued a regulation imposing a 12-minute cap on
ads. Broadcasters complained this regulation was unworkable, and
appealed to the Telecom Disputes Settlement and Appellate Tribunal
(TDSAT)
• By mid-June, there was an agreement — they would reduce ad time
to 12 minutes by 1 October. Many fell in line, some didn’t.
• The court issued notices, since it is a criminal offence. The
broadcasters appealed before TDSAT, which asked us not to prosecute
during the hearing. Now, the judgement is expected