Just a few days ago, A. Raja, India’s telecom minister was out soliciting investments from NRIs in the Telecom Sector.
The global recession has hit India’s 3G Auction hard: the auction has been deferred twice in the last 3 weeks. Yesterday, the Department of Telecom updated their spiffy 3G Auction page with a notification that “The revised time line for auction of 3G and BWA spectrum will be notified shortly.”
There have been fears of a lack of interest from foreign investors. There have been reports of plans to double the auction price, and reports of plans to scrap the auction altogether if the bids are not up to a certain desired level. Doubling the auction price seems highly unlikely, because of the global financial situation. Some points to take into consideration:
— Short Term or Long Term? In a recessionary environment, companies tend to focus on short term business goals, and not take on ambitious projects. Telecom is a business that requires high capital expenditure (CAPEX), and India is a market where high ARPU circles (metros) are saturated and the pricing is among the lowest in the world. There are no short term gains in this market, and companies will think twice before taking that long term punt.
— Raising Funds: NTT DoCoMo has deferred the open offer for Tata Teleservices, and the Unitech-Telenor deal hasn’t gone through because Telenor hasn’t been able to raise funds yet. Details of that deal here.
— What do you get? Just high-speed spectrum and the authorization to incur the CAPEX and launch services? The existing players, from what we’ve heard, are merely looking at this as an opportunity for spectrum to make voice calls and offer 3G broadband. Telenor, you may recall, wasn’t interested in the 3G Auction anyway.
Sure, new dates may be announced soon, but also bear in mind that general elections have to be held in India before May 2009. Give a month and a half for campaigning, and it appears that if the auctions aren’t held before the end of March 2009, we’ll have to wait for a new government.