Ladies and Gentlemen,
Today has been a momentous day in the history of Indian Law. 122 licenses have been scrapped. This has been a culmination of a process which saw issue of licenses, in blatantly , unfair process, which is being conspicuously described as a FCFS[First come , First serve] Policy.
The Crux here is that, licenses have been sold in 2007 in prices , which were that of 2001. The Other major point has been, that, there was significant loss of revenue to the Govt. since, the process was undersold.
Let us examine, the first point, about FCFS. So, if a certain date is defined as START and other date is defined as END. imagine 30 people applied before the start date.
On the end date, you invite your local builder, asking him, to meet you with a bank draft at your office. at 3 pm that day, since office closes at 5pm, the drafts are deposited.
Then, a notice is given saying, the license bidding process is over. This effectively leads to earliar bidders being disqualified. So, what was done? The Goal Posts were moved. When? After the Match is over. 6-0 becomes 0 - 7.
This was the problem. Not the FCFS. For, some of us physics enthusiasts, who like theory of relativity,the frame of reference was changed.
Why FCFS?
In 2001, India had terrible mobile penetration. If I received a call, I paid Rs. 6 to the telecom provider. So, Indian Innovation created the missed call economy.
Then BSNL came to the market. Incoming became free. Reliance followed up by offering phones at Rs.500 with an embedded SIM. So, the market had to adapt. Learn or get booted. Airtel, which charged Rs. 6 per minute, came down to less than Rs. 1. The low prices of spectrum, were the result of demand and supply. There would've been no buyers otherwise.
This made the Indian economy, the cheapest mobile economy in the Planet.
Come to 2007, some more spectrum was allocated. was there any difference to the common user? absolutely nothing? I made calls in 2001. I made calls in 2007. By 2007, I was already paying about Rs.1 per minute. So, allocation did not really make a difference. It brought some new players.
Let us discuss, how this court decision destroys foreign investment? We have so-called experts from consulting companies, crying 'Banana republic". Let us discuss their argument, piecemeal.
They say, the 3G auction, has lead to bad quality of service. Why? Too much money went into a deal, so not much is left for infrastructure support. Let us not confuse things. We are discussing the 2G judgement, let us take that into account.
Imagine a company like Etisalat. It had a budget of say, 20,000 crores for investing in telecom sector in India. Now, the Govt. gave off that spectrum , at a pittance. to Swan Telecom. The same Swan telecom, resold the spectrum license at 6-7 times the price i.e. 10,000 crores. So, Etisalat is left with about 10,000 crores for the infrastructure. Now, if etisalat paid the market rate to swan telecom, how will it affect the same investor, if he goes through an auction process again? He will again pay market rates. How does, the end-consumer, get affected?
He has to migrate to some of the older providers, using mobile number portability. His technical provider worked under market considerations. Obviously, the best measure of market considerations , here is the auction process. Go ahead, make it transparent. may the best man win at the Market Place.
Strictly speaking, the provider will still work on market based standards.
About investment getting hurt, markets determine prices, based on demand and supply. I'm a capitalist and a believer in free markets. If a certain company is paying extra, because, of competitive pressures of the auction, it deserves to die. Saying that, auctions, dont leave enough scope for capacity expansion in terms of infrastructure, is a terrible business practice. The same providers, will not have any ground left, later, when, Our honourable I&B ministry, prosecutes you in court, since, a kid in Mumbai, had something to say against, some renowned Delhi elite using his TATA Docomo connection.
Work out a plan. decide your financials. If the bid does not match your financials, get out of it. Dont depend on political support to help your balance sheet. That's where corruption starts. I'm dont need your investment. My market is big enough, to ensure, that, we will get investors. Japanese and South Koreans are welcome.
2G scam shows the worst of capitalism in India, since, it is actually a reflection of all the crony capitalist elements of the pre-1991 liberalisation, with the financial numbers of a post-liberalised economy.
We need less state controls and more openness. 3G has not added networks, since, the app ecosystem, did not have the need. That is changing now. Smartphones are picking up. I promise, the providers will respond.
Comments