CAG unhappy with inefficient use of spectrum

The CAG has picked holes on telcos’ propensity to seek more spectrum all through the last decade but getting cold feet when the government wanted to do allot spectrum through auctions. But its observations about how telecom service providers made inefficient utilisation of spectrum which they already hold are even more scathing.

Inefficient spectrum use and hoarding not only led to loss of revenue to the government since spectrum is a precious commodity, it also obviously impacted quality of mobile service across the country as well. So now perhaps there is some explanation for frequent call drops and other problems most of us have faced over the last many years while using our mobile phones.[caption id=“attachment_823091” align=“alignleft” width=“380”] Spectrum issues. Reuters[/caption]

But unlike the “presumptive loss” report by previous Comptroller & Auditor General Vinod Rai, this time the CAG has merely said inefficient use of spectrum and its hoarding meant that the Department of Telecom missed out on thousands of crores as revenue from spectrum usage charges during the last five years. It has not made an estimate of this loss. In its report, the CAG has also noted the “huge” quantity of spectrum lying idle in circles to bolster its observation on revenue loss to DoT.

CAG has observed that one service provider has been catering to 91 lakh subscribers with 10 mhz of spectrum, another operator in the same service area of Delhi with 12.4 mhz spectrum was providing mobile services to barely 26 lakh subscribers! Yet another operator with 4.4 mhz spectrum had a reported customer base of 28.51 lakh in the same service area.

The CAG letter says as on 31 December 2012, Bharti Airtel was catering to 90.28 lakh customers in Delhi with 10 mhz spectrum and its Adjusted Gross revenue for 2011-12 was Rs 2621.62 crore. But four other operators were having total spectrum up to 29.2 mhz and their total AGR for the same period was only Rs 1757.16 crore. This means the four telcos has AGR which was only two-thirds that of Bharti. “It was therefore evident that scarce spectrum is not being utilised efficiently, economically and optimally…. and causing huge loss on account of spectrum usage charges to the Government exchequer”.

AGR, or Adjusted Gross Revenue, is the benchmark on which telcos pay a spectrum usage charge to the government. So by pointing out the discrepancy in AGR and spectrum held by telcos, CAG is basically speaking of lost revenue of crores to the government which would have accrued had the spectrum been used efficiently.

CAG has leveled charges of hoarding against Aircel, which had insignificant number of subscribers in four circles of Gujarat, Haryana, Himachal and Madhya Pradesh as of December 2012 compared to other telcos who were awarded the same quantum of spectrum as Aircel. So what CAG is saying is Aircel got spectrum but did not use it like others to provide mobile services and had this spectrum been allotted to others, government would have earned revenue as spectrum usage charge.

CAG has also made another interesting point: five new telcos Uninor, Videocon, Loop, Sistema Shyam and Etisalat were given 105 of 121 new licenses in 2008 but these telcos together accounted for only 10% of additional subscribers added to the country’s mobile network between January 2008 and January 2012. So the startup spectrum awarded to 92 licensees was hardly utilized while existing telcos were clamouring for additional spectrum all this while. Also, in at least 50 service areas awarded to these five telcos, they had nil or negligible presence even four years after licenses were granted.

“It was therefore no wonder that a top TSP which had not participated in auctions held in November 2012 and March 2013 opted to have a private tieup with two TSPs for sharing 2G spectrum in many service areas in 2013 rather than approaching DoT for award of spectrum through auction”.

CAG has also noted that state owned MTNL and BSNL have also had lower number of subscribers in many service areas compared to private telcos; it has wondered at no action by DoT on TRAI’s recommendation that at least 2.4 mhz spectrum be withdrawn from these PSUs.

So how is the DoT responsible for the crores of rupees of loss to the exchequer if telcos are not using spectrum efficiently, hoarding it? CAG says DoT has not incentivised efficient and effective use of spectrum, it has not strictly implemented its own quality of service standards and its inappropriate decision making has meant substantial amount of spectrum is going waste.