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After the auction

Government has sought to maximise revenue. India’s telecom story remains imperilled.


Updated: March 28, 2015 12:00:13 am

Telecom companies have reason to lament after paying nearly Rs 1,10,000 crore for the purchase of spectrum at the recent auction. For one, the industry is already saddled with over Rs 1,50,000 crore of debt; the borrowing requirement to meet auction payouts will only add to this. The operators wouldn’t have minded contracting fresh debt if this was for capital expenditures towards towers, antennas or mobile exchanges. In this case, they are simply paying the government for airwaves, instead of investing in network rollout. Worse, out of the total Rs 1,10,000 crore, roughly 60 per cent would represent the sums that operators such as Bharti Airtel, Vodafone and Idea Cellular will pay for spectrum they are currently holding and whose rights were to expire in 2015-16. In other words, this is capital spending simply to ensure business continuity rather than fresh infrastructure investments leading to the creation of jobs and incomes that the economy really needs today.

The government, no doubt, is significantly to blame here. Its primary interest from the auctions, it seems, was to maximise revenue for the exchequer. By putting very little spectrum on sale, taking advantage of the operators’ desperation to retain existing holdings of the cost-efficient 900 MHz frequency band, and not coming out with rules allowing sharing and trading of spectrum, an artificial scarcity of sorts got created. This approach of viewing auctions more as a milch cow than a means for transparent allocation of a valuable natural resource is going to be counterproductive in the long run. Telecom service providers have scripted one of the greatest success stories of liberalisation. India now has over 95 crore mobile subscribers, translating into an overall tele-density of 78 per cent. But broadband subscriber coverage — narrowly defined to cover download speeds above 512 kilobytes per second — is abysmally low at 9.5 crore, even as consumers pay far too much for data services. If the government is serious about Digital India or broadband for all at a minimum speed of 2 megabytes/ second, it has to ensure that the basic raw material — spectrum — is both adequate and affordable for operators.

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True, the telecom firms have to pay only around Rs 29,000 crore of the total Rs 1,10,000 crore up front; and the balance over 10 annual instalments after a two-year moratorium. Also, the spectrum they have bagged would be theirs for the next 20 years. But the fact is that the auction monies will be over and above a separate spectrum “usage” charge, licence fees and service tax. All these would eventually be loaded on to the consumer, who will pay the real price.

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First published on: 28-03-2015 at 12:00:09 am
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