Global Telecom Companies will not participate in October 3G Auctions

Posted on September 2, 2008. Filed under: Business | Tags: , , , , , , , , , , , , , , , , , , , , |

Telecom Minister A Raja’s statement that 3G spectrum auctions will be concluded by October 2008 has virtually blocked out most new entrants, especially global telecom companies which are already disillusioned by the higher financial entry barrier. Partnering an existing operator to get over this hurdle doesn’t help global entrants either. Investments in Indian Telecom Companies require FIPB approval. Moreover these Indian companies are valuing themselves at $2 billion despite that fact only 6 out of 22 circles have received 2G spectrum. New entrants need to prepare their bidding strategy for pan India auctions. This requires detailed information but DoT’s three page guidelines leave most questions unanswered.

Unlike existing operators, who carry the advantage of a detailed understanding of Indian market, new global entrants have to prepare bids based on assumptions and market projections. Global telecom companies face grimmer challenges. Greenfield 3G operations require an investment of around $3-6 billion. The 74 % FDI limit in the telecom sector makes it mandatory for global giants to seek FIPB approval which will take around three months. Other activities will take another three months, hence in total global telecom companies require at least six months to place their bids for 3G spectrum. DoT secretary S Behura has also recently confirmed that 3G auctions would be held in October. With global entrants ruled out, auction collection projected to be Rs. 400,000 million may end up being only a fraction of this.

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