3G auction highlights Raja’s 2008 sham

Simple facts: the Sensex on January 10,2008 was at 21,000 points,its all-time high. Currently,it is hovering below the 18,000-mark. This clearly establishes that the ability of mobile operators to pay for precious 2G spectrum at that time was much higher than it is now.

Second,3G spectrum is a different wireless band—2.1 GHz—requiring different equipment and networks. In contrast,2G spectrum equipment and networks were existing with the operators in 2008 and would not have required higher capex,meaning the companies would have bid much more aggressively to get 2G spectrum were it auctioned then,than the current 3G spectrum auctions.

Third,India is,and continues to be a voice market (92%) rather than a data market of 3G and broadband. Sample this: Against 563.73 million mobile phone users,we have around 60 million Internet users and less than 10 million broadband users. It is quite clear from the current 3G auction trends that the fight is to get the spectrum for voice. Bids are the highest for Delhi and Mumbai at Rs 1,083.27 crore and Rs1,079.93 crore respectively than what it is for circles like Bihar,Bengal Orissa or Himachal Preadesh—the reason being that 2G spectrum has reached a saturation point in the top two metro cities than in the C circles.

The entry-level cost for a 2G handset is around Rs 900-1,000 while it is Rs 6,000 for a 3G handset. Quite clearly,even if they had paid higher for 2G spectrum,operators could have penetrated the market faster and more gainfully. In sharp contrast,monetisation of 3G spectrum would be limited.

Now let’s look at the country’s total mobile subscriber base at end-December,2007,which stood at 233.62 million.

Currently,it is at 563.73 million. This means that in the interim,operators have added 330.11 million subscribers and are still willing to pay a premium on spectrum. Naturally,they would have paid much more at 233 million because the ability to penetrate the market was much higher then. With fierce tariff wars in the interim,the average revenue per user also came down by Rs 50.

Last but not the least,that there was a higher premium for 2G spectrum than 3G is clear from the strategy of Norway’s Telenor,which in October,2008 acquired 67.25% stake in Unitech Wireless for Rs 6,120 crore. Telenor,which is the world’s seventh-largest mobile operator,is the only one not participating in the 3G auctions. This,despite the fact that Norway was among the first country in the world where 3G was launched and it also has presence in the entire South Asian region. It’s quite clear that if 92% market is voice,and operators have enough spectrum there,there’s no point fighting for 3G spectrum. The ones scrambling for 3G are doing so are due to the 2G spectrum crunch,and they would not have done the same had Raja auctioned the same in 2007-08 instead of doling it out to new licensees at throwaway prices.