The government?s chaotic 3G licensing policy has been thrown into further turmoil with the news that many foreign operators have decided to stay away from the auction scheduled for January 2009. If foreign operators do not participate in large numbers, expected revenue for the government may fall dramatically. The delay in the auctioning process that led to its rescheduling, in what is now post-financial meltdown gloom, had damaged prospects in any case. The shortage of bidders comes also at a time when the fisc could do with extra revenue generation. What is particularly ironical is that foreign participants? probable non-participation comes after a torturous official debate on licensing rules. The rules were amended. But not quickly enough. And, it could be argued, not by enough.

Foreign operators will wait for the opening of the mobile virtual network operator route. Under this, they can lease airtime (and thus bandwidth) from a licensed operator. The main attraction is the lower cost of operating through this route, rather than setting up an entire 3G network and service from scratch. The estimated initial investment for a 3G network is Rs 17,000 crore and, initially, operators will typically have a very small customer base?industry reckons around 5 million. In the context of the global slowdown and tight credit, it makes eminent sense for operators to opt for the low-cost solution at this point in time. Another option for foreign operators who choose not to bid would be to buy a stake in a licensed operator later, like Telenor did with Unitech and Swan did with Etisalat. That may still be more cost-effective than bidding now and setting up a network. However, like in the Telenor and Swan purchases, it will likely result in disproportionate profit for the Indian bidder at the expense of the government. Whatever the final outcome, it is amply evident that the government is the sole loser in the entire process. And the blame lies at the door of the telecom ministry and its minister, A Raja. But Raja has ensured that will not happen. If Raja was the CEO of a corporate firm, would he have survived this long?