TRAI proposals clearly favour Reliance Ind: analyst

The Telecom Regulatory Authority of India’s proposals on spectrum auction clearly favours Reliance Industries, according to Sanju Verma, managing director and CEO - securities business, Violet Arch Securities.

“This policy is certainly a pro-Reliance policy . That is very clear because the government says that we are not going to allow new players to bid for 4G airwaves before 2015. So, indirectly, it has given Reliance a head start of two-three years,” she told CNBC TV18 in an interview.

Earlier this week, TRAI proposed to defer the auction of 4G spectrum in the 700 MHz band is, which is seen as positive for Reliance Industries, the only company with nationwide 4G spectrum. The government had plans to auction 4G spectrum in the 700 MHz band this year, which would have given a chance to Reliance’s competitors to build all-India coverage and may have even forced Reliance to buy spectrum in the 700 MHz band, which is considered far superior than the company’s current holding, as this Reuters report notes.

Verma said the proposals, apart from being pro-Reliance, favoured neither the incumbents nor new players.“If the TRAI recommendations with respect to reserve price for the 800 and 900 megahertz bands come into effect, I think the biggest losers will be Bharti, Vodafone and Idea.”

Collectively, the three companies will have to shell outRs 95,000-100,000 crore just to stay in business and renew their spectrum and licenses if TRAI’s proposals are accepted, she said.

The freeing up of Internet telephony is also a big positive for Reliance. Companies with access to broadband telephony will be the biggest beneficiaries because they will be able to offer much cheaper international calls via landlines compared with mobile phones.

“The likes of Bharti, etc., are going to get adversely impacted because nobody will want to pay 60-70 paise per minute to make an international call when you can make an international call from your landline at 1/10th the price. That is a facility which is only offered today by Reliance thanks to the fact that two years back, it acquired Infotel, giving it access to broadband telephony,” she points out in the interview.

In May 2010, Reliance Industries bought a 95 percent stake in Infotel Broadband for Rs 4,800 crore, in addition to paying Rs 12,848 crore for 20 MHz of spectrum in all 22 service areas in India, the only company to do so.

An Economic Times report on Wednesday also noted that Reliance Industries would emerge as the biggest beneficiary if TRAI’s proposals are accepted.

Verma believes that overall, there is a “huge regulatory mess” in the telecom sector, reflected by a sharp decline in monthly subscriber addition numbers and corporate profitability and revenues.“Existing players have to pay Rs 40,000-50,000 crore just to stay in business, so as one of the leading telecom operator said, it’s better to shutdown telecom companies and perhaps do business in some other geography,” she said.