India’s Supreme Court sent shockwaves through the country’s mobile sector earlier today by cancelling all 122 of the 2G licenses that were awarded under controversial circumstances in 2008.
The markets reacted swiftly. Stocks of telecom companies whose licenses have been scrapped, like DB Realty, whose promoters are invested in Etisalat DB, Unitech and Videocon, tanked instantly. Stocks of Bharti Airtel were trading up – older players like Airtel have no exposure to these licenses.
The administration at the time – led by former telecoms minister A Raja – is accused of selling-off the 2G licences on a first-come-first served basis and potentially costing the country $39 billion it would have made if it had conducted a competitive bidding auction.
In 2008, Mr Raja ignored advice to hold an auction for licenses and spectrum. Instead, he followed a first-come-first-serve policy. But he twisted the guidelines so that companies who he allegedly colluded with jumped to the head of the queue and won licenses out of turn. They paid a pittance- the rates used in 2008 were based on the prices of 2001, even though India had many more mobile phone users by then. 122 licenses were issued.
At the end of 2008, India’s mobile service providers boasted nearly 347 million connections, a year-on-year increase of nearly 50 percent. The government expects the subscriber base for combined wireless and wireline connections to touch 600 million by the end of 2012.
The allocation of spectrum and licences by the government in 2008, led to the arrest of a former communications minister Andimuthu Raja, a member of Parliament, business executives, and government officials. The 2G licences were issued at 2001 prices without an auction, even though other government agencies, such as the Ministry of Finance, had asked the Department of Telecommunications (DOT) to review the decision
In cancelling the licences, the court declared that their award had been “totally arbitrary and unconstitutional,” reports the Financial Times. “This is a major step forward for us in the war against corruption,” said Subramanian Swamy, one of the petitioners in the case before the Supreme Court and the head of the Janata Party.
The country was divided into 23 circles when the mobile phones were introduced in the country. Separate licenses were given out for each of the circles in 1994. The circles were classified as Metros, A, B or C depending upon the revenue potential for the circle.
In India, fixed line subscribers are not even 10% of the mobile subscriber base. The Indian telecommunications industry includes some 706 Million telephone (landlines and mobile) subscribers with 670 Million mobile phone connections as of Aug 2010. Virtually none are yet 3G. According to Informa Telecoms latest forecast, the number of active mobile subscriptions in India will rise to 1.159 billion by the end of 2013, making it the world’s largest mobile market.
Only nine million of India’s 1 billion people have access to broadband. India’s Department of Telecoms hopes the country will have about 48 million broadband users by 2012, and 100 million by 2014.
Big winners in the 2.3 GHz (4G) auction held in 2010 included Bharti Airtel, Aircel, Vodafone Essar, and Tikona Digital Networks. The decision by Reliance and Qualcomm to back LTE TDD, made the LTE standard an unstoppable force, especially when combined with China’s support for Time Division LTE.
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