From better to the best

2G Auctions

A lot is happening in the fresh 2G auctions in place. Some of the TELCOs are already opposing certain policies. Here is some food for thought-

  1. It is a level playing field and not a monopoly by auctioning the spectrum. There will be more presence other than major playing TELCOs which occupy more than 65% of the market share.
  2. Shift in spectrum would mean another additional investment; most of the 1800 MHz should be targeted towards the rural areas, leaving the infrastructure of the 900 MHz band mostly in urban and semi-urban cities as it is.
  3. Reservation should not be done for any TELCO, but auctions should be done. Foreign players should not be allowed to auction beyond certain circles, or places. I like the decision that the foreign players have to tap an Indian partner within 90 days, but only allowing a maximum stake of 49% in the partnership.
  4. Tariffs might see a nominal increase for the amount gone towards the infrastructure development. Again it is a catch-22 situation. A greater increase in data services will be curbed through the increase of the tariffs. The tariffs should be increased more in non-voice services or specifically VAS by the TELCOs.
  5. Consolidations might happen in the next 8-10 years. It is hence wise to allow joint bidding of the smaller players with larger forces in the auction with a disclosed partnership model to the government, but only two players going for consolidation in the partnership and not more than two. This will allow the smaller players have a marginal gain in revenues during the operation, and the joint forces can bid at higher prices. Whether this can be implemented is the question?
  6. Allow 2 MHz for top 5 bidders for the 22 circles. This would remove losses for the TELCOs not doing well after the auctions. But the government should raise the prices for this corridor. This might mean a counter effect of not allowing too small a player to bid at higher prices, but thinking of the investment cost to be borne, the smaller TELCOs might be at a loss. This is to avoid any further delay in the investment in 3G also. The country needs to move on.
  7. So, either there is a consolidated partnership model to bid, or there is an administered auction by not allowing open bidding. Collaboration is the key and not open bidding.
  8. Nothing should be in a rush. Even though Telenor is banging the door, the future should be kept at mind. Consolidations will happen to remove loss at a certain point of time, around ten years, and hence, partnership at later stages should earn revenues from the government, in case the current joint bidding is disallowed now.
  9. Not to disturb the sentiments of the people, the government should convey that the tariffs will not rise to a greater level, even after bidding. This is a message that should clear doubts in the mind of the people.
  10. Spectrum is a rare commodity. It should not the let go waste. Auctions are the only means to reach the goldmine in the country to address the fiscal deficit and route the money to other industries like infrastructure, energy and food security. It is indeed necessary.

Hence, we see that it is better for the best to have a well-laid plan for the 2G auction in place with a slow pace.

References: 1. The Hindu on 2G auctions 2. Economic times on 2G auctions

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