Yeah, that’s what I thought: not a lot of hands in the air.
The auction, which opened on Monday 12 November – only to pause for the Diwali holiday on Tuesday – is putting up for bid 2G spectrum licenses that were invalidated earlier this year by the Supreme Court, which ruled that their original issuance in 2008 was “arbitrary and unconstitutional.” (So much so that the telecoms minister at the time, Andimuthu Raja, was arrested and jailed.)
Cancelling the licenses without compensation left a number of major international players, including Telenor, Etisalat, and Sistema with unpleasant alternatives: exit the market or pay again for something they thought they had already purchased. (See “Post Supreme Court verdict, it’s Catch 22 situation for foreign operators in India” and “Telenor, Etisalat, Sistema and India's License Debacle: A Harsh Reminder About Risk and Return “)
But the assumption was that at least the second auction of this 2G spectrum would be priced reasonably.
Well actually, not so much.
The Department of Telecoms has set the reserve price at roughly USD 2.6 billion for 5 MHz nationally. As of the end of Monday’s bidding, bids had crawled up to just over USD 300 million, and there were no bids in some circles, including Delhi and Mumbai.
There are wrinkles and subtleties to the story, no doubt, but one inescapable conclusion is that severe damage has been done to the brand image, if you will, of telecoms in India. However much the government may wish to reap large sums of money from telecoms providers, those providers are surely looking at years of contradictory and dilatory regulation and wondering just how much agony is worth enduring to compete in what is, at the end of the day, a very challenging low ARPU market.