'a Deal That Did Not Make Commercial Sense' - Prabir purkayastha on the antrix - Devas multimedia deal

Hello and welcome to Newsclick. The commercial deal between the Antrix corporation - the marketing arm of the Indian Space Research Organisation and Devas Multimedia was in the news recently. The deal was scrapped after The Hindu first reported the irregularities in deal. The department of space had already recommended cancellations somewhere mid last year. The deal actually involved the design, building and launch of two commercial satellites by ISRO for Devas multimedia and the lease of transponders and therefore S band spectrum to Devas Multimedia. We discussed the issue with Newsclick's Prabir Purkayastha who is an expert on telecommunications and who has been working on this sector, about the sector rather, for past two decades. Thank you. Prabir, tell us in brief why was this deal cancelled at all and what were the aspects of the deal that you think necessiated its annulment. I think, this deal does show that Antrix as a space arm of ISRO, really does not have a clear commercial sense of what it is doing. If you leave out the issue of spectrum for the time being. Just take the deal as lease of transponders as devas in pointing out which was all it was according to them but let's take that itself as the issue. Here Devas was going to pay them something like three hundred million dollars over a twelve years period which works out at the current market rates to about twelve hundred odd crores. for which up front ISRO would have to spend something like seven hundred and seventy six crores to launch the two satellites. If you take the net present value of the money that Devas was going to give them over a period of twelve years, it appears that at the end of the day the it appears Antrix would receive less money from Devas than seven seventy six crore that it was going to pay upfront. So effectively, commercially it did not seem to have much sense, as far as the deal goes. The second part of it is the question of the spectrum and of course spectrum is a big issue because it was not only that this was just lease of transponders It was also taking over 70 Mega Hertz of S band spectrum and that was proposed to be used for essentially broadband purposes. Which would of course mean the spectrum price is not just the transponder lease we really also have to look at the spectrum price. When you first intially mentioned that just by simple commercial sense the deal between Antrix and Devas would not have made sense then why did ISRO go about this deal in the first place. What do you think the dynamics between the deal at all. Well, lets put it in this way. If there is a commercially bad deal. The deal which commercially makes no sense and if it is struck with parties, who have your ex-employees on all those companies in leading positions, one could always suspect that there is a sweetheart deal in this. Now I'm not really going by whether it is a sweetheart deal, how was it a sweetheart deal. On the face it, it's a deal which makes no commercial sense. And if it makes no commercial sense there was no reason why Antrix or ISRO should have entered into it. The question to my mind is a bigger one. What is the mechanism by which we can regulate this activity, because space has today a commercial arm we have a commercial arm for atomic energy. We could have commercial arm of different governemnt organisations which originally was set up only to provide public good. Once you entered into a commercial deal what is the basis of which this deals are, what is the charter, how they should look at it. I think that's one of the biggest failings of these kinds of organisations. They neither have the ability nor clear guidelines to how they should commercialise, and as a result of that, sweetheart deals could very easily takes place. The CAG as it's initial estimates in The Hindu reported said that be says that if you take 3G auctions as the benchmark thenn the presumptive loss from this deal would amount to nearly two lakh crores which is even higher than what was the presumptive loss from 2G spectrum case. Could you please explain the dynamics behind the spectrum? You see, each part of the spectrum has different values. and unfortunately the SATCOM policy which is what everybody is referring to is really extremely spare, meagre, not really... doesn't cover a lot of aspects of this issues. So the SATCOM policy treats everything as the transponder lease it doesn't treat the spectrum issue at all. This is one of the key problems of the SATCOM policy because ultimately what Devas is saying and in this they are right then we must refer to the SATCOM policy for what we're doing the point is that having refered to the SATCOM policy, the SATCOM policy really looked at DESAT service providers and directly leasing of transponders for various other services. Everything else DTH services, VSAT providers has really come under the TRAI and department of telecom as well. So space is involved but so are these arms. unfortunately in this particular deal this part of the spectrum, which space really was sitting on, which in fact has been asked a number of times by TRAI and DOT that this spectrum should be release for broadband purposes. Space not only sat on this but in this case also virtually sold it to Devas Multimedia. Now, I think the important part of it is while Devas Multimedia has raised the issue that other DTH service providers are also getting spectrum so why single us out. The difference is that the DTH service providers are really using it for a very specific purpose and not competing services for broadband wireless for which this spectrum can be used. This spectrum certainly is a part of the spectrum which can be used for broadband wireless purposes, can be used for other purposes and while department of space has refused to part with this part of the spectrum has always raised the issue that this is important for security and various other purposes we can't therefore give it. What they didn't tell anybody, till now, is that they had also given it for broadband wireless purposes to Devas and they are sitting on the spectrum not because they didn't want to release it for broadband what they wanted to release for broadband under their auspices. So there is really a direct conflict of interest or conflict of what shall I say, the regulatory apparatus dealing with spectrum on this issue that who effectively is in control of the spectrum. Speaking with the valuation again a comparitive metric use for the valuation of s band spectrum can be done by looking at the sale of 20 Mega Hertz of the same spectrum to BSNL and MTNL. Similar spectrum. That was I think sold for around twelve thousand fiver hundred crores. Yeah. The whole issue is while space looked upon it as if it was transponder lease the purpose of the spectrum seems to be multimedia broadband application, terresterially. Now if it is so, we have to compare it to similar services which are going to be offered. Now this deal was struck in 2005 therefore it's true that the spectrum price which we know in 2010 wasn't available then. It really opens out the issue how spectrum is allocated. what should the principal of giving spectrum for private parties. if today we're looking at spectrum, spectrum today for instance is with defence, with space, for instance part of it is used with information and broadcasting, All India Radio and so on and and of course largest custodian of spectrum is of course the department of telecom using for mobile services and so on. Now the question is all of the spectrum use, who regulates that is a consistent policy regarding. And that is the huge hole that we have in the policy today at spectrum allocation spectrum use is really not being considered in a systematic way and consistent way. Therefore, each part of the agencies who deal with spectrum thinking that it is a private property and they can dispose it off in anyway they will and that's in fact the one of the major reasons for this kind of fiasco. Coming back to the sale of the spectrum again. The government in it's kind of rationalization of the 2g spectrum sale- in the manner it was done. official circle say that the ones should not look at spectrum sale merely as revenue accruing process but rather as a process that unleashes the forces of telecom revolution even further. Now this raises a larger story itself of sale of publicly owned resources, the mineral resources or spectrum you know the question about spectrum being given cheaply so that mobile services can expand and people have to pay less this would make sense if there is no resale of the spectrum that company is receiving it. All we have done we really have converted what could have been a public auction and the private one. So without a lock in the giving away of spectrum does not make sense. The second part of it is how you give away a spectrum, is that is that just for the benefit of the consumer or the the benefit of the company. That's the key issue. and this is across the board today, if you look at it and we have at least three clear issues before us. One is the issue of spectrum which is being given away at low cost, to corporate entities. It's not that it is given away for public goods like low priced rice. it's been really given me as a benefit to corporate entities who are selling it again. So this is one part of it. second part of it is for instance the gas pricing reliance at one point was negotiating with NTPC. In fact, there is a binding contract with NTPC to sell gas at dollar to 34 per million BTU. we have the government of india then sets the price at dollar four twenty for the gas which means a huge subsidy to quote unquote subsidy to Reliance Industries. This is a clear transfer of resources from the people who are the ultimate consumers to Reliance Mukesh Ambani's Group Third is today of course the huge issue of land now whether it is army, whether it is railways, everybody is sitting on prime real estate in the country Now, if they decide that this, what was given to it as a part of railway infrastructure, as a part of army's use, if this can be privatized or commercialised then you can have huge windfalls. So in fact, it is the third part of the scam which we are seeing now. Adarsh being an example of this but there is another element of it which is mineral resources. They are also being given away to private entities in the same way. So what we are seeing is primitive accumulation of capital on a grand scale. and this is what the neo-liberal agenda of privatization private development infrastructure that has really set the stage up for We have a new set of capitalists, we have old capitalists political class coming together and a massive rip off of national scarce resources for private aggrandisement and i think that is the key issue today which is really what is upsetting a whole set of people.