Indian Telecom Story (Part XXV): A Rs.60,000 crore lost opportunity

The delay in 3G spectrum auction translates into a Rs.60,000 crore loss

The war over vacating the spectrum between the defense and the telecom ministries has already taken 3G to the backseat. Indian bureaucracy and red tapism is virtually killing a big opportunity. The loss estaimation is about Rs.60,000 crores. This will be the damage to the Indian economy by deferring the 3G spectrum allocation for an year. Countries around the globe have stolen the march into 3G and 4G is increasingly kicking off as operators are preparing commercial launches in 2010-11.

The loss amount of Rs.60,000 crore has been arrived at by putting down the direct transactions that would have happened, had the spectrum gone under the hammer as scheduled. During the ongoing slowdown, Indian operators could have negotiated for a better rerate with foreign vendors for rolling services has the auction happened earlier. The UPA government could have benefitted by raking in money through spectrum and annual fee, generated additional employment opportunities for the jobless, banks could have found a golden chance and fund 3G, vendor benefits would have been huge and for the Indian subscribers data and video would have become their friend next door. Additional internet/broadband growth would have impacted out GDP growth.

Rs.40,000 crore would be government’s accruals from the sale of licences from 3G auctions.

Over a year’s time (duration of the delay), the interest cost would be Rs.4000 crore.

Additional revenue generated from 3G services from the government would be Rs.1440 crore.

A Report released by FICCI and BDA Connect early estimated the 3G subscriber base will represent 12% of the overall wireless subscriber base contributing $15.8 billion in service revenues in 2013. 3G ARPU was projected to reach $18.3 billion by 2013, with revenues totaling up to $12.8 billion in the same year. Data was expected to contribute 29% to 3G ARPU from handset users. The government stands to loose 10%, approximately Rs.144 crore as license fee from this revenue as initial deployment is expected to be in metros and category A circles.

Mobile revenue in FY 2008-09 was approximately Rs.95,000 crore, 1% of this amounts to Rs.950 crores.

On the Capex, operators who would have won the bids would have spent about $3billion~Rs.13,500 crore, which has now been pushed back. Greenfield operators are expected to spend more money compared to the established biggies who need to mainly upgrade their network to accommodate next generation services.

3G is being looked up-to as a technology that would improve internet penetration in the country and for every 10% increase in broadband penetration, there is a 1.4% increase in GDP of the country, so the loss can be worked out accordingly.