Tangled telecom

India’s most celebrated success story, telecom revolution, turning into a tragic tale of ambiguity and disputes. The failed auction of 2G spectrum is yet another illustration of the fact that India’s fastest growing sector is a clear victim of policy deficit, corruption, short-term policies and disconnect with market realities.

The just concluded rather aborted 2G spectrum auction is a result of chain of inconsistent government decisions. The reason for the failure of 2G auction lies in the fact that reserve price determined by it was quite high, in the wake of which hardly any telecom operator turned up to bid and only 9,407 crore could be earned against the anticipation of Govt. of 40,000 crore. Exceptionally higher scale of erudition was not needed to comprehend the market realities of the day. TRAI and Government have already been cautioned by the experts that  a high reserve price may  be a dampener in the given situation. It was entirely nonsensical to put up the reserve price so high when profit-making potential of telcos is already going down. They could have bought the spectrum on the same price back in 2008 but then it was allowed to have been sold nearly for free. Now when many telecom circles are in the stage of saturation, how the Govt. can expect the telecom operators to invest such huge amount of money on buying spectrum. It is worth to mention that elevated bids for acquiring 3G spectrum had resulted in bleeding the reserves and squeezing bottom lines of all major telecom companies.   

Indian telecom sector is losing its sheen in the eyes of investor on one hand while tariffs are rising for subscribers on the other. The most serious fact is that growth of new mobile connections has tanked in recent month because of a policy disputes and uncertainties.  For instance, in the reign of Raja, 2G spectrum was allocated on first-cum-first-served basis. As no viable rules were there he could readily distribute the spectrum voluntarily exploiting the Govt. property considering it as his own. The episode resulted into one of the biggest scam in the country and Supreme Court had to cancel all the licenses awarded by him in 2008. Bearing it in mind, next time the Govt. resorted to the system of auction for the sale of 3G spectrum in 2010. The same method it repeated recently in the allocation of 2G spectrum as well, the denouement of which is not unknown to anyone.  

The Govt. now intends to re-auction unsold spectrum in the month of March and still hopes to reach the budgeted target of 40,000 crore. Again a faulty decision! There is no rocket science into understanding that the reserve price will be brought down in the next auction. What wrong did the companies, which purchased the spectrum in the current auction do that they are liable to pay more for the same spectrum the other companies might be getting in lower prices in re-auctioning? If it happens those companies will definitely move the court of law and the growth of telecom sector will again be stuck due to another controversy.

India’s tele density hovers around 60%, hence there is still enough potential  of growth of voice telephony via 2G while offering a high speed mobile data service to the urban middle class though the 3G platforms. It is too difficult to understand why Govt. fails to take prudent decisions and behave so nonsensically. Too painful it is to see the demise of the growth of most thriving business in India which still possesses enormous potential to prosper further.