2G re-sale to benefit govt

Cancellation of the 2G licences allotted in 2008, which is likely to free up about 500 MHz of spectrum, may bring hundreds of crores of rupees to the cash-strapped government while also turning out to be a boon for the remaining market players as many are expected to opt out from the re-bidding process.

The Supreme Court has asked the government to allocate the 2G spectrum through auctions and not through first come first serve criteria as followed earlier.  This is certain to make a huge dent in revenues for those opting for re-bid.

Experts say this will start the eliminating process as those who have invested a fortune will stay, but others, for whom the calculated risk has turned out to be a problem, will vacate.

“The elimination will leave a fewer players in the market but a lot of spectrum to spare, and they are more likely to get it cheaper than expected,” said a telecom analyst.

Nature of auction

But others are of the view that the demand and supply equation will be determined on whether this auction will be opened for all operators or will be open only for the people whose licences are being cancelled.

The affected companies whose licences are cancelled include Uninor (joint venture between Unitech and Telenor of Norway), Sistema-Shyam (joint venture between Shyam Telecom and Sistema of Russia), Videocon, Loop Telecom, Idea Cellular, Etisalat DB (joint venture between DB Realty and Etisalat of UAE) among others.

Among these, Sistema-Shyam, which offers mobile services under the MTS brand and Unitech-Telenor joint venture that provides services under brand Uninor have made huge investments for rolling out the services across the nation.

While Sistema-Shyam claims to have invested about Rs 12,500 crore so far for acquiring licences and rolling out services, Telenor says it has put in over Rs 6,100 crore in equity and over Rs 8,000 crore in corporate guarantees as a foreign investor.

Re-bidding process

Whether the companies stand to gain or lose, the economists say that the Central government, which incurred a presumptive loss of over Rs 1.7 trillion from the sale of the licences at below-market prices, is sure to gain from the re-bidding process for spectrum allocation.

Sector regulator Trai has already recommended auction of spectrum for future allocation based on Unified Licensing regime, under which operators will have to pay for the spectrum determined through auction.