India’s 3G Auction

After all the bungling that happened in 2008 with the allocation of spectrum to a bunch of new operators for a pittance, I am amazed that India can still keep messing up its telecom policy. The rules of the 3G auction keep getting changed — perhaps depending on who has met whom the previous day. And now, it has been decided to delay it by two weeks. Here is my assessment of the reason.

I think the government has realised that after all their changes in the rules and the liquidity crunch which has hit businesses (including telecom operators) worldwide, their hopes of raising $10 billion has all but vanished. I think what the government has realised that all its flip-flops on the rules has pretty much ensured that foreign bidders (for whom the conditions were stiffer, since they didn’t have a 2G operation) will all but stay awa. So, with just the domestic incumbent operators left in the fray, the ‘auction’ wouldn’t really end up that way. As a result, the bidding would probably have ended up a little higher than the reserve price of about Rs 2,000 crore for a national licence. So, what does the government do? Double the reserve price! With 5 licences to give out (including one to BSNL/MTNL), at least this way it ensures that it can garner a minimum of Rs 20,000+ crore.

My feeling on what will happen is that the 3G auction will probably not happen in Jan. And if its gets delayed further, we start moving into pre-election territory when the code of conduct will start coming into effect, and it could end up being delay to the end of the year after the new government takes over in May-June. I don’t think theincumbent operators will be too unhappy with this — no one is really clamouring for 3G. The most valuable thing that 3G offers is more spectrum — which will probably end up being used for vopice rather than data services.

I hope this does not happen. India needs wireline and wireless broadband services of every kind if we are to create a future in data services — our digital infrastructure has been messed around since time immemorial.