Thursday, July 19, 2012

Ridiculous….the Rs 18K crores base reserve price number for 2G spectrum….

The papers report that the EGoM is most likely going to accept the TRAI’s recco on fixing the reserve price for the forthcoming 2G auctions at Rs 18K crores for pan-India 5 Mhz spectrum. The telecom operators have been complaining that this is unreasonable….that this high base price will all but kill the vaunted Indian telecom revolution. But is anyone listening at all or are all of them out to get the industry??

Very interestingly, a few days back, the new TRAI chief, Rahul Khullar admitted (or should we say accused) that telcos had made a mistake with their 3G auctions. That they had paid too much for it. This statement is worth analyzing. Hidden within this statement is the widely accepted disappointment that 3G has become. It’s ironic that the “highly successful” 3G auctions which set the stage for the 2G scam accusations to be levied by the CAG are themselves now being called a failure. Failure not because of other factors, but the very same ones on which it was called a big success – the auction amounts. The actual offtake of 3G is far lower than what the telcos had budgeted for. An insider told me that the telcos had expected to have 100 million 3G subscribers by now…..instead what they have managed is just 20 million or so. And the reason for this debacle? Only one…..hire tariffs. Like everything else in this country, 3G is extremely price sensitive. With data rates going for three-four times of average 2G ARPUs, the offtake was bound to be slow. And why are the rates so high? Because the telcos have paid too high a license fee. Remember also that this is for a “premium” service like 3G. If 3G can be this price sensitive, how price sensitive will 2G be?

Khullar also said that the telcos were saddled with huge debts taken for their 3G bids. And that they were most unlikely to be able to raise equity from the very moribund stock markets of today. If this is true – then how does TRAI expect the telcos to bid these exhorbitant amounts for 2G?

But most importantly, if there is recognition in TRAI that the 3G bid amounts were fundamentally overpriced, then how can it recommend that the same overpriced bids be made the reserve price? How can a mistake of the past be perpetuated in this way?

There is greed in business and we are told that greed is bad. Wall Street has traditionally symbolized corporate greed and the world over, Wall Street has become a symbol of scorn. But what do we do with Government greed? Here is a case where the Government is looking at bridging its fiscal deficit by wringing dry the telecom industry (assuming that players bid at all). What about the fall-out of this overzealous money-making drive? What if the telecom industry were to get killed in the process? Where does that leave the ordinary citizen?

I have always maintained that telecom is a revolutionary technology and its impact on poverty alleviation, citizen empowerment etc in addition to plain simple economic growth is well known. If any proof was required at all, yesterday’s report of the World Bank should settle it. From the TOI of yesterday: “Mobile communication has arguably had a bigger impact on humankind in a shorter period of time than any other invention in human history,” the ‘Information and Communications for Development 2012: Maximizing Mobile’ report released by the World Bank on Tuesday says. And “In India alone, the mobile industry is expected to generate around 7 million indirect jobs during 2012,” the report says.” Now the Government intends to finish this industry off.

Even conceptually, how can the maximum bid of the previous rounds become the starting point of bidding this time around? The starting point is supposed to only be an amount that discourages frivolous bidders from bidding. Beyond that, the starting point has no value since the final bid price is an independently determined number. The problem with a reserve price as high as Rs 18K is that the final bid cannot be lower than that number. But what if the rational value is less than that? Too bad…..

The Government has become entirely capitalistic, but again, I have written many times about this. The entire system is conspiring to make India a capitalistic country. When the SC orders “auctions only” and when the CAG dumbly fails to understand how the Government can give natural resources away “for free” in public interest, what else can we expect? The new capitalistic India breeds on government exploiting every resource financially. So what if the end-user tariffs increase? So what if only the top end of the society gets the benefit of these resources? So what if this increases the economic gap between the rich and the poor? So what if telecom is hailed as the biggest social revolution world over but India’s poor are kept out of it? So what???? In an era of stupidity, what better can we expect?

Someone in the Government needs the guts to say: We will not let business rationality and pro-business governance become the victim of this vicious environment. We cannot forget that it is business that generates jobs; grows GDP. We will keep telecom pricing low; we believe in its transformational power. We will explain to the public why we don’t want to keep reserve prices high….but who in the government has that kind of courage? On the one hand, we have a media that is so much just plain yellow journalism; and on the other, we have rapacious institutions (CAG, SC) and activists (Anna, others). Between the two, we have a pusillaminous government. Business entities are starting to be looked at as evil; businessmen as profiteering thugs.

The real truth is that very soon, we will be sounding the death knell of the famed Indian telecom industry. Well done, all politicians. Well done, all constitutional authorities. Very soon, we will succeed in fully polishing off the entire Indian growth story. Why do we need enemies when we have insiders like these????

1 comment:

  1. Well said, natural resources are Gods gift to mankind. Anyone who auctions it or makes money out of it will be punished by God.