Boom or bane time for telecos

If the ambitious reserve price of Rs 11,485 crore per unit for auction of the most efficient 700 MHz spectrum band as recommended by the Telecom Regulatory Authority of India (Trai) is accepted by the government, this alone can fetch the resource-constrained exchequer a whopping Rs four lakh crore, at the minimum. Along with other frequencies required for the 2G and 3G services in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz, 2300 MHz and 2500 MHz, the government can rake in Rs 5.50-six lakh crore over the next 12-13 years from the service providers. But bulk of the milking would be done by sale of premium low frequency 700 MHz which has been given a benchmark four times the cost of 1800 MHz. No doubt, those in possession of this quality of air waves would be able to provide the most efficient, high-speed data service by investing much less capital in building physical infrastructure. But then, the cost of acquiring the prized spectrum would certainly be many times over. While a good response to the ensuing auction, expected in May-June, would result in a windfall for the exchequer, the point is whether the debt-ridden telecom firms, with the exception of Reliance Industries, which is in the process of Jio roll out, would be able to buy the expensive air waves?

In a way, these firms, including Bharati, Vodafone and Idea, would be in a fix. Having seen an exponential growth in the mobile subscriber base exceeding one billion, the next phase of expansion will come from the data services for different segments, which also explains a surge in smartphones ranging from low end to ultra high end. The case in point is 38 per cent revenue jump by the iconic Apple in India contrary to its flat business in rest of world. In such a scenario, no service provider would like to be left behind in offering top of the line 4G service at the best of capital efficiency, which can come from the 700 MHz band. But this task has been made rather difficult by the Trai which has set the bar high. The government can do some tinkering but any drastic reduction in the reserve price can raise the hackles of those always smelling an unfair play. Wary investors junked the telecom stocks exactly for this reason.

Where do the consumers, who have suffered enough on account of call drops, figure? Surely, the subscribers would be able to give a push to the data services only if the efficiency is matched by affordability. The trick lies in ensuring a win-win situation for the consumers and a sufficient number of players and not one or two who can resort to predatory business practices with deep pockets.