Red tape and bureaucracy may be accepted as part and parcel of doing business in India, but the handling of India’s much-heralded third generation, or 3G, auction looks particularly shambolic. Delays, confusion over eligibility and an 11th hour proposal to double the reserve price are marring the effort to sell 3G technology licences in the world’s fastest growing mobile market.
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India is already slow in getting to 3G. The dominant operators—Bharti Airtel Ltd, Reliance Communications Ltd, Vodafone Essar Ltd and Idea Cellular Ltd—are anxious to get started. The government isn’t making it easy. The rights auction has already been delayed by two weeks, and a spat over the reserve price for each national licence threatens to make the wait even longer.
The government claims it is confident that the auction will add as much as $8 billion (Rs38,880 crore) to its deficit-challenged coffers. But the finance ministry wants to double the minimum reserve for each licence to guarantee it gets a good sum. Politicians are anxious to repeat the early 2008 underpricing of 2G licences. Since then, local start-ups Unitech Wireless Ltd and Swan Telecom Pvt. Ltd have sold stakes in their companies to foreign players for up to six times the original amount at which the licences were won.
Bottleneck: A proposal to double the reserve price is marring the effort to sell 3G licences in the world’s fastest growing mobile market. Xabier Mikel Laburu / Bloomberg
Upping the reserve price may be sensible, but should have been suggested months ago. India’s government is now struggling to win approval for the change. Bidders expect the auction could easily be delayed again until mid-February—and privately describe the process as incompetent. If the auction isn’t held within the next two months, it’s unlikely to happen until well after the country’s national elections expected in April.
Fortunately for the government, India’s existing mobile operators are expected to bid regardless of auction delays. But the disarray is enough to deter the new foreign entrants the government hoped to attract.
Selling 3G licences in India should have been easy, but this shambolic debacle simply reinforces the country’s reputation as a painfully hard place to do business.