Column : Killing the telecom goose

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Sunil Jain : Nov 06 2012, 21:49 IST

Giving advice on what stocks to buy and what stocks to sell is pretty dicey, but when it’s a sure shot that may not be such a bad idea—like Reliance’s stock will do better if the government raises the gas price RIL gets. Telecom is one such sure shot, and here’s the advice: till the government changes its policy, you’re going to make a loss each extra day you hold on to telecom stocks. Apart from the dismal economic conditions, the messed up government policy is the main reason why there are such few takers for next week’s auctions that look certain to be a washout given the number of players participating is really low.

A good place to begin is the Rs 30,000 crore—a third of this from PSUs BSNL and MTNL—that the EGoM wants telcos to pay for the ‘extra’ spectrum they have (table 1). While telcos argue they got the ‘extra’ spectrum as a result of bona fide government policy, this is missing the point—after all, Uninor can claim it got its licences out of government policy that everyone in the government argued (some still do!) was bona fide till the Supreme Court ruled otherwise. The question is whether the government got compensated for, say, giving spectrum worth R5,000 crore for an upfront payment of just R1,651 crore.

Turns out, the government did get compensated. Here’s why: when telcos were given this ‘extra’ spectrum without being charged an upfront auction-type fee,

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