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Delay in 3G auction led to $16 bn loss: study

Delay in 3G auction led to $16 bn loss: study
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First Published: Wed, Jun 03 2009. 12 35 AM IST

Updated: Wed, Jun 03 2009. 12 35 AM IST
New Delhi: The delay in the auction of 3G spectrum in the past two years has led to a loss of around $16 billion (Rs75,360 crore), according to a study by LECG Corp., a global consulting firm. The losses include direct investments as well as those arising from the loss of notional productivity gains.
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The much-awaited auction of spectrum or air waves for third generation, or 3G, mobile telephone services has been continually postponed by the government, in part due to differences between the finance ministry and the department of telecom, or DoT, over the reserve price that is to be charged.
On 1 August, DoT had announced details for the auction for such data-intensive services, with a deadline of 16 January. This was initially postponed to 30 January, and then deferred indefinitely.
“The Indian market has been ready for 3G for a long time. Many of the operators have been planning to launch 3G services since 2005,” said Jaikishan Rajaraman, senior director, with the GSM Association, a global industry body of telecom operators offering services on the GSM technology platform.
“Many of them have already got standby orders in place waiting to give the go ahead for the roll-out of the services in the country,” Rajaraman added. “The more you delay the auction, the greater is the cost of capital at a later time when the auction does happen.”
Investments in 3G in India would lead to an economic benefit worth around $70 billion, Rajaraman said.
The onset of 3G services is usually accompanied by an increased usage of mobile broadband (or high speed Internet services). “For every 10% increase in the broadband penetration, there is an increase of 0.1-1.4% in the country’s GDP (gross domestic product),” Rajaraman added.
Meanwhile, DoT has set a new deadline for the 3G auction.
“The 3G auction will definitely take place by the end of this year,” A. Raja said on Monday while taking charge of the ministry of communications and information technology for the second consecutive term.
“The auction should happen by September or October if there are no hurdles in the next few months,” an official at DoT said, asking not to be identified. This person added that most issues appear to have been sorted out.
The government had set up a group of ministers to sort out issues related to the 3G auction. Raja said he didn’t know the current status of this group because some of the ministers that were part of it are no longer part of the new government. He added that he would send the proposal directly to the cabinet committee on economic affairs (CCEA) for clearance.
There are a number of variables that can be included in losses due to the delay in auctioning 3G services said an expert. “These could be revenues that could have been garnered from subscribers added, licence fees, spectrum fees, direct and indirect employment, revenues to the value added services operators, handsets sales and even income tax to the government,” Mahesh Uppal, director with Com First (India) Pvt. Ltd, said.
Graphics by Ahmed Raza Khan / Mint
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First Published: Wed, Jun 03 2009. 12 35 AM IST