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After two years: Telecom sector hopes auction will signal revival

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Govt expect the auctions to raise more than Rs 40,000 crore which will make the fiscal deficit for FY 14 attainable. Govt expect the auctions to raise more than Rs 40,000 crore which will make the fiscal deficit for FY 14 attainable.
SummaryFeb 2: Two years back, SC’s licence cancellation order came on the same date.

Exactly two years after the Supreme Court had cancelled 122 licenses of 22 telecom operators, on Sunday another bench of the same court cleared the last hurdle for the government to hold spectrum auctions tomorrow.

At 9 am on Monday morning at the offices of each of the eight bidders as the connections with the auctioneer will light up on schedule, few officers will however have the time to reflect on the amazing coincidence as they pore over the price movements for each airwave on offer.

In a special hearing on Sunday the court refused a stay demanded by Bharti Airtel, Vodafone, Loop and Idea Cellular Ltd on the auctions even as it admitted their petitions.

This means the government offer to sell 253.8 Mhz in the 1800 band and 46 in the 900 band can finally go through. Sources in the government expect the auctions to raise more than Rs 40,000 crore which will make the fiscal deficit for FY 14 attainable.

On February 2, 2012 the Supreme Court decision had created a meltdown in the Indian telecom sector that also pulverised the Indian economy. It sent Sensex companies like Bharti into eight quarters of plunging top line, wiped out about half a million jobs from the sector and put government into three international arbitration cases with foreign investors in the sector like Sistema from Russia and Telenor from Norway making mincemeat of India’s growing reputation as a prime investment destination.

From being India’s best growth story the telecom sector also created a huge discomfiture for the UPA government, as one minister A Raja went to jail with the then telecom secretary and another was hauled up by the CBI for questioning; questions reached the Prime Minister’s Office too.

Irrespective of how Monday’s auction pans out, this then is a turnaround story. In its assessment India Ratings & Research has consequently revised its outlook on the sector to stable from negative for FY15. “This is based on a gradual revival of investor confidence on the back of emerging clarity on regulatory issues towards end-2013,” it notes.

The positive developments include a reduction in the spectrum base price, relaxation of M&A norms and raising of the FDI limits to 100 per cent. All of these have made the auctions something telecom operators are looking forward to, it says.

It was another auction in December 2010 that had plunged

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