The prevailing regulatory, licensing and policy uncertainties in the telecom sector have been taking their tolls on the private and public sector players alike.

While sentiments have already been subdued in the wake of Airtel posting ten consecutive declines in profits, the state-run telco Bharat Sanchar Nigam Limited (BSNL) has reportedly suffered perhaps the biggest annual loss ever in its history. (See also

Interestingly, BSNL Chairman and MD RK Upadhyay is said to have attributed the poorer-than-last year performance to regulatory issues which accounted for Rs 3,100 crore of the losses and included the additional license fees and spectrum charges in excess of Rs 1,500 crore.

In this context, it becomes less surprising that BSNL had requested for a refund of more than Rs 8,000 crore in lieu of it surrendering its broadband wireless access (BWA) spectrum, which was allocated to the telco by default.

Airtel, on the other hand has been hit by additional operating costs necessitated by an ultra-competitive market, among other things. It goes without saying that the prevailing ultra-competitiveness has been direct fallout of regulatory and licensing gaps.

It so appears from the CMD’s statement that in the absence of the additional Rs 3,100 crore expenditure on BSNL’s balance sheet, the telco’s loss would have been Rs 5,751 crore, which would have been reasonably below the previous year loss of Rs 6,384  crore.

It is being argued that if telcos whose licenses were cancelled by the Supreme Court don’t participate in the 2G airwave auctions of January 2013, the degree of market competitiveness would be back to normal. The question, however is, would that be a desirable solution?

Certainly not. Any demise-led exits of players from the market would be more detrimental to the sentiments in the telecom industry than was their entry. Over the past years, despite the pressures, the market also has adjusted to the number of players to a certain extent. In fact, had the 3G bids not shot through the roofs, the telecom industry would not have been in such bad financial state today.

There is a pressing need to do some course corrections. Insufficient 3G uptake despite the massive pricing cuts effected by telcos a few months ago is already a vital signal to that effect. Both the government and the industry need to find out solutions that are sustainable in the long run.

BSNL and Airtel results have clearly hinted that there could be licensing-regulatory gaps that need to be tackled. Can the new Telecom Policy help? Maybe, but even that has been delayed again and again.  
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