A large number of telecom companies worldwide have lost interest in the 3G bidding as it implies steep financial and regulatory barriers. Discriminatory guidelines coupled with loads of uncertainty have been announced by the government for the third generation bidding. This may also keep away new entrants along with global majors.
Recent reports have revealed that the Indian government faces Rs 40K Cr hit on flawed norms. This comes to light as until recently, companies like Deutsche Telecom, Etisalat, AT&T and NTT were interested in India’s blooming mobile market. The government’s ambitious plans of hoarding approximately Rs. 40,000 crore have run down the mill due to the absence of global telecos. The auction of the 3G spectrum will obtain just a fraction of Telecom minister A Raja emulous target provided existing operators dominate the bidding.
Arpita Agarwal, associate director-telecom, PwC remarked, “If the objective of the 3G policy was to raise revenues through new competition, then it has failed as new entrants face a serious disadvantage against existing operators.”
Potential new entrants revealed some major reasons for downgrading their interest to negative in the bid. The first they claim is that in order to get a unified access service license, they will have to shell out a whopping Rs 1651 crore. This they say is “unjustifiable, discriminatory and a burdensome payment”.
For 3G entrants, this is much unlike existing operators as this is the price of a paper without the 4.4 to 6.2 MHz of startup 2G spectrum. The second hindrance is the mindless application of April’s M&A guidelines to 3G licenses. Under the present M&A regulations, a 2G operator is not only permitted, but distinctly qualified to bid for and gain 3G spectrums. On the other hand, a 3G winner does not stand to merge or acquire any 2G operators for three years.
Kunal Bajaj, director-India, BDA, a global consulting firm, commented, “A standalone 3G business will not work. Clearly, global firms will be constrained to find a business case given the severe policy limitations.”
A third hurdle is the uncertainty of 3G spectrum allocation beyond 5 MHz. A potential 3G bidder revealed that their growth is curbed from the beginning itself, as they cannot bid beyond a single block of 5MHz. In addition they cannot acquire 2G spectrum.
Operators, especially new entrants are hence apprehensive in taking the plunge in this multi-billion dollar bid. The dubious future of 3G or 2G spectrum is putting them off this auction. The lack of clarity on several areas critical to auctioning is also another reason potential bidders plan to stay away.