After getting over R67,000 crore in the 3G auctions in 2010, the government is struggling to get even a seventh of that two years later—at the time of this edit being written, the final numbers for all circles hadn’t been compiled. The immediate conclusions a host of worthies are drawing from this are (a) auctions just don’t work and (b) the CAG’s loss figure in the 2008 Raja allotments were woefully incorrect. The real explanation may be a lot simpler: 2012 is not 2010 and its certainly not 2008, the year for which the CAG made its loss calculations. While many were looking at 9% growth rates as par for the course then, 5.5% looks the more credible figure today. More important, from the point of view of telcos, they were relatively debt-free then; they’re debt-laden now. For Bharti Airtel, the net debt-to-ebitda has gone up from 0.15 before the 2010 auctions to 2.75 now and while that’s still manageable, this will go up dramatically once Bharti has to pay for the ‘extra’ spectrum and, more importantly, when the government goes ahead with its refarming proposal for the 900 MHz spectrum that older telcos like Bharti hold in another two years.
The larger issue, of course, remains that of government policy gone awfully wrong. We’ve dealt with the policy of the government getting too greedy and almost doubling the annual outgo from telcos (http://goo.gl/rq2rd) by charging a high upfront auction fee along with 12-13% annual outgos on account of license fees