A series of events have been triggered ever since the Supreme Court of India cancelled all the 122 2G licenses issued in 2008. The initial hit was expected to cause serious damage to the country's and telecom sector's image, foreign investments, funding, services and consumers, but looks like we may still emerge relatively unharmed from the impact, apart from losing face and loads of revenue. All foreign players involved in business deals with the affected operators, though backed by their respective governments are looking to come to terms with the situation in the best possible way. With the exception of Bahrain Telecommunications Co (Batelco), the first casualty of the impact, which chose to pull out of its joint venture with STel, the others are keen to continue their investment in the country/sector, Telenor-Wipro tie-up still going strong.
As for the country and the sector's image, Mahesh Uppal, a leading Telecom Analyst opined in a recent interview that license cancellations only go to prove that such scams will not be tolerated by the country in future. The verdict will thereby serve to regain/ retain foreign investor confidence in the sector. It is also to be noted that foreign investors actually acquired their share at market prices and were not really guilty in this case. Uppal also outlined the importance of fixing an fair reserve price (ideally 2001 prices corrected for inflation) for the auctions in order to ensure a well-participated process, which otherwise may not be justified. Base prices earlier suggested by TRAI were found to be six times the 2001 price of Rs 1,658 crore for 6.2 MHz pan-India license. Incumbent telecom operators bidding for additional spectrum beyond the contracted units were expected to shell out 4,572 crore for every MHz on a pan-India basis. Will fair pricing help to offset the exchequer's revenue loss?
The impact of the license cancellations on the banking sector is expected to surface as bad debts only during the first quarter of next financial year. Even then, most of the loans seem to have been covered by tangible or other securities such as fixed deposits and guarantees, eventually affecting profitability of the banking sector by about 10% according to a Fitch rating. DOT, in the meanwhile has turned-down the request for spectrum to be used as collateral to generate funds / offset debts.
MNP is of course expected to facilitate consumers, but the hiked tariffs and limited competition may not really offer a choice. A recent development indicates that despite a 20% hike in tariff rates, Airtel has seen a 22% drop in quarterly profits and also a 7% decline in average monthly minutes used per subscriber. It has also been noted that despite a number of telecom service providers being active in the sector, there is hardly any competition among them. TRAI is now expected to chip in with suitable policies to regulate and cap mobile tariffs on voice and data usage, now that data usage being accessible even on low-priced phones is no longer a premium service.
Another interesting point that came to my attention was the fact that TRAI is manned mostly by ex-Govt and ex-DOT members, and was drawn up by the verdict for its 'lopsided' approach in dealing with 2G licenses. All the more reason for TRAI to tread carefully on future policies.
India follows the "better late than never" policy in almost all walks of life; punishing crime/fraud is no exception. Looks like this scam is headed towards creating a better, clean, and competitive environment in the Telecom sector. According to Mahesh Uppal and many of us, spectrum or airwaves is a natural resource, and should benefit the land and its people at large and not simply serve to enrich the pockets of the chosen few. Things are in fact limping back to normal, but auctions within the stipulated four-month time seem a highly optimistic proposition right now.
About the author : Lakshmi.A is a Contributing Editor for TradeBriefs. She can be reached at