Telecom Licenses + Spectrum in India

There is a massive rush from different corners of corporate India to run mobile services. It all started with realty firm Parsvnath Developers,  followed by Unitech and DLF. IndiaBulls, retail stock broking chain has also thrown its hat in the ring. Existing operators, HFCL and Spice who have slept over a decade have suddenly woken up. Flip flop cellco, AT&T is also belived to be in the race [I don’t recall where I have read, but for sure they are exploring ways to get back after they parted ways in Idea Cellular].

I normally don’t like to predict things, but looking forward on how things can possibly shape up in the next 12 months and eliminating choices, here is what I think is likely to happen.

• Committee will submit report after scrutinizing Telecom License applications on who the final and real beneficial owners are. [Applicable in case of promoters like Ruia’s of Essar and Anil Ambani of Reliance]
• Expert committee comprising of mostly technocrats will submit their opinion on efficient use of spectrum [Currently GSM operators get nearly twice the spectrum than CDMA operators by virtue of previous recommendations.] This time GSM operators will be told to use better mix of GSM technology  to make the best use of spectrum.
• Current PAN India mobile license costs mere Rs 1,500 crore. Going by the democratic stand adopted by TRAI not to deny license to anybody, Government is likely to raise the fees to eliminate weaker souls. Telecom is no Finance or Software Exports business.
• Atleast 5 companies would still want to realize their Telecom dreams and apply for approvals and spectrum. With atleast 8 different operators in one circle and small amount of spectrum availability, IT ministry will have no choice but to auction fresh spectrum.
• My guess, fresh spectrum will be atleast thrice as more expensive than the cost of acquiring current spectrum. With high entry costs for new players, Red numbers on their balance sheet is not ruled out.
• Existing players will continue to offer services at existing rates or at slightly higher rates. New entrants will have an uphill task. Now the bottomlines of listed entities may take a hit, but there is a blessing in disguise, the spectrum. Idea, Bharti Airtel and Vodafone Essar’s spectrum valuation will be an hidden asset. If Dalal Street continues to rock, then these stocks will get re-rated by the virtue of their Spectrum which is expected to be valued atleast 3 times than existing rates. [This ofcourse, is after assuming that the government will untouch already allocated spectrum. Though, newer recommendations will ask them to upgrade networks and make best use of allocated spectrum thus delinking the model of allocation based on subscriber numbers. If allocation continues on subscriber numbers, then for sure, GSM lobby has an upper hand in the corridors of North Block]

A single unhappy soul can land the entire process in TDSAT or Supreme Court which will mess things badly and hurt the growth.

India for sure wants cheaper telecom service. Innovation is very essential to keep things rolling. Is there a way to deploy Wimax or other wireless networks which can be optimized for Voice traffic ? Reminds me of what Dr. Paulraj said, Indian government must take the lead and encourage companies to innovate in the field of wireless technologies. We Indians can’t always ride on technologies invented by others, at some point of time we have to step on to the cycle of innovation 🙂