Soaring prices, souring telecom sector?

06th August 2012
Soaring  prices, souring   telecom sector?

New Delhi, August 6 2012: The Indian government’s decision, announced last week, to set the starting price for a 5.0-megahertz slot of spectrum for offering telecom services using GSM, technology at Rs 140 billion rupees ($2.51 billion) and similar spectrum using CDMA technology, 1.3 times that for GSM at about Rs 182 billion has been received with disappointment bordering on outrage by the cellular industry – but the feeling is not universal.  (In subsequent paras quoted from Indian media, pl note 1 crore = 10 million)

Says the Economic Times this morning: If the forthcoming auctions for telecom spectrum come a cropper, and the degree of competition in the sector comes down sharply from the level prior to cancellation of 122 licences by the Supreme Court, the government will have no one to blame but the Cabinet. ….the social and economic gains from affordable telecom services far outweigh a short-term bonanza for the exchequer
MailToday agrees: “The high reserve price of Rs14,000 crore for a pan India licence for the auction of 2G spectrum fixed by the cabinet spells trouble for both consumers and telecom companies.
The companies will have no option but to pass on the increased costs to consumers, who could eventually see their mobile phone bills going up by as much as 30 per cent.
The Indian Express is ambivalent: “…The government will be able to bridge its fiscal gap without having to bother overmuch about the oil subsidy. ..As of now, the government is the winner. Whether the public also wins, time will tell”.
The New Indian Express ( the south centred separated twin of the Indian Express) has exactly the opposite view: “The Union Cabinet’s decision to set the reserve price for 2G spectrum at Rs 14,000 crore is both pragmaticand sound in principle. Scarce resources should not be sold cheap. The telecom companies have protested over the price but the government would be well advised to ignore the breast-beating.”
Veteran business journalist R Jagannathan, writing in the web portal First Post agrees with this view and uses almost identical phrasing: The Union cabinet’s decision to set the reserve price for 2G spectrum at Rs 14,000 crore is perhaps one of the best decisions it has taken in a long, long time. It may have come at the wrong time – telecom companies have already started their breast-beating exercises – when the economy is trending down, but it is sound in principle. Scarce resources should not be sold cheap.

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Links to cited editorials/ articles: Economic Times: High spectrum base price: An immense setback for telecom sector   
Mail Today:  
Indian Express: Telecom spectrum auction will enrich the government and cost the industry dearly   
New Indian Express:  
First Post  
For the background, the Wall St Journal report: India’s airways soar: