Editorial: Dial-a-roadmap

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SummaryWith no spectrum clarity, bids will be astronomical

Analysts will argue endlessly on whether existing players lost their head or whether the entry of a Reliance Jio forced their hand and made the bids so astronomical that they make little sense. If industry is just about recovering from the irrational bids of over R1 lakh crore that it made for 3G and BWA spectrum in 2010—and the Zain purchase in the case of Bharti Airtel—along with the impact of the A Raja-induced unfair competition, the current bids of nearly R56,190 crore already for 900 MHz and 1800 MHz spectrum is guaranteed to put it back in trouble. Not only have telecom firms not recouped even a fraction of their 3G/BWA investments, in many cases, even the networks haven’t been rolled out due to lack of consumer demand. In which case, the obvious question is why industry is bidding in the manner it is. As in 2010, one reason is that companies are desperate to retain their current base of high-paying customers. In 2010, firms felt that the higher-paying 2G customers would desert them if they didn’t offer high-speed internet on mobiles—that is, telcos paid a certain proportion for the expected 3G revenues while a larger amount was paid just to retain the existing 2G customer. In 2014, with the government refusing to renew the 900 MHz spectrum of operators in the 3 circles where bidding is taking place, telcos can’t take a chance with upsetting their existing subscriber base on this spectrum—given these subscribers are the older ones, they pay many times more than what new subscribers do. Theoretically, the 900 MHz customers can be migrated to the 1800 MHz band, but it will take a lot of time and trouble.

At the heart of the bidding trouble, and this will repeat each year as more 900 MHz licenses come up for renewal, is the government’s inability/refusal to come out with a credible long-term spectrum availability policy. In 2010, when A Raja dramatically cut the spectrum availability for existing players—the spectrum due to these firms as part of the subscriber-linked policy was cut off by a 4-5 time hike

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