Here is the edited transcript of the interview on CNBC-TV18.
Q. Make sense of this for us because there is no official confirmation or clarity from the government on what is the decision that they have actually taken. No decision taken on refarming, but what they have actually decided to do as far as excess spectrum is concerned we don't know. This is all source-based information and there is a lot of speculation at this point in time. Have this only made matters worse in terms of confusion and what if we go by what we have heard so far that's being reported that beyond 6.2 MHz it is retrospective to 2008 and 4.4 MHz is prospective. What does this really mean for the industry?
A: In the absence of any official communication the operative word here is confusion. But, let me tell you what I have understood and this is from news articles and so on that are coming up. Prospective refers to anybody who has spectrum and all spectrum above 4.4 Mhz is charged prospectively. The impact of that is about Rs 23,000 crore.
The bit about prospective charging is anybody who has spectrum greater than 6.2 MHz will be charged retrospectively for the last 4 years and the impact of that just on GSM operators. I haven't calculated the impact on CDMA but, it is about Rs 7,500 crore. Essentially, we are looking at an impact of about Rs 30,000 crore or Rs 30,000 plus crore and that is an assumption in the absence of any official communication.
This can lead to no social good that's expected from this industry. My view is all it will do is either increase tariffs or it will destroy value for the entire telecom value chain. It is not just about operators. Operators deal with vendors, partners and others. It will suck out cash and profitability from the system and it will destroy value. So I can't see this and the desire to have broadband for all and broadband for masses etc. If we go ahead with this it is unfortunate.
Q: The financial implications are going to be dire as far as this sector is concerned. But, let me ask you about a decision that at least we have clarity on and that has not been taken and has to do with refarming. The Telecom Minister strangely coming out and saying that we will decide on refarming perhaps a week before the auction, what sense does that make?
A: There are two things, one is if you refarm you need to keep spectrum in the 1800 MHz band that has to be given to operators who may wish to give up their 900 MHz spectrum. How much you auctioned today also depends on how much you wish to refarm.
I think there has to be a clarity on whether operators need to give up all their 900 MHz or they are allowed to keep 2.5 MHz or 5 MHz because that will determine how much comes up for auction because clearly what's coming up for auction is not the available 1800 MHz spectrum that can and will be auctioned in the future
Again, the operative word is confusion. There has to be a comprehensive statement. There has to be a comprehensive policy both around refarming and amount and timing of spectrum auction.
Q: In the backdrop of this confusion, in the backdrop of the kind of financial hit and the financial impact that incumbent telecom operators are going to have to face, what happens to the 2G auction? How do you really see the 2G auction progressing from hereon given this context?
A: It is not just about incumbent operators. Today, the incumbent operators are faced with this dilemma of having to pay for spectrum that they hold. If new operators come in they will also be impacted. I don't think it is only about existing operators and their challenges. It is about the entire industry being impacted by this.
Now who will participate in this auction? Clearly, India is an interesting market, people and operators may want to come in. But, these spectrum charges, this reserve price makes it extremely difficult for operators to come in and make money. But, I am sure or at least I believe new operators will still consider India as lucrative and come in.
I guess, you will see both existing operators who have a spectrum crunch as well as new operators participate. I can't see prices too much beyond the reserve price for most of the circles, some of the circles might see demand beyond supply, but not on a pan India basis.
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