Following this month’s decision by India’s Supreme Court to cancel all of the 122 2G spectrum licences granted in controversial circumstances in 2008, several companies operating in the country are re-evaluating their future in India.
The intention of the Supreme Court is to right the wrong of licences that were awarded in troubled circumstances in 2008. The administration at the time is accused of selling the 2G licences on a first-come, first-served basis, potentially losing the country billions of rupees that could have been raised through a competitive bidding auction.
Since the allocation of the 2G licences in 2008, a number of foreign operator groups have built a presence in India, including Batelco, Etisalat and Telenor. But the operators in which these companies have an interest now have just four months left to operate unless they secure new 2G licences.
Middle East-based operator group Batelco appears to have had enough of the uncertainty and is in the process of selling its 42.7 percent stake in STel. As the company previously noted, it didn’t buy into STel until 2009, meaning it wasn’t involved in the 2008 2G licence auction.
Etisalat was forced to write down the value of Etisalat DB, a joint venture with local Indian partner Swan Telecom. The company expects this to impact net profit by more than AED1 billion (US$272.2 million).
Telenor meanwhile recognised an impairment loss of NOK2.4 billion (US$424 million) related to its Uninor joint venture with Unitech. Telenor president and CEO Jon Fredrik Baksaas said the company is “working to protect our investments in all possible manners, and will consider every option prior to any further investments.”
And it isn’t just the operators that have arrived since 2008 that are concerned – operators that secured spectrum prior to the 2008 auction want to make sure they’re not discriminated against in the new 2G auction.
Bharti Airtel, Vodafone Essar and Aircel have said the new auction process is about “airwaves and not licences,” meaning it should be open to the established operators. The post-2008 entrants disagree, saying the auction is about “fresh licences”, implying that the incumbent operators should not be able to participate.
So newer operators are facing problems due to the scrapping of existing 2G licences and implications of another auction, while the more-established players are having their noses put out of joint by the possibility that they may not be able to take part in the process to acquire new spectrum.
There will come a point when these inconveniences might become too much for foreign operator-investors. They’re not building a presence in India to fritter away money, they’re there to tap into the huge potential the country has for mobile-related revenue.
And the value of these foreign operators to India is significant. The Indian mobile industry is much younger than in more developed markets and so the operators that have been involved in the early days of mobile elsewhere have the expertise and experience to help push things forward in India.
Losing these operators would have a financial impact but also mean a loss of valuable knowledge about the industry.
But if the way in which the industry is governed and organised in India continues unchanged, foreign operators may begin to wonder if it’s worth the effort, despite their previous investment.
The way in which the cancellation of 2G licences was handled has created a situation that India’s government and the TRAI should not allow to fester. Put simply, they need to handle things carefully.
Operators affected by the 2G licence cancellation have already made financial losses and cannot be completely certain that they will secure new 2G licences through the new spectrum auction. And if the financial losses and uncertainty continue, Batelco may not be the only operator to head for the hills.
Indian authorities need to assure operators that they will be able to recoup their losses and operate 2G services once again. And with market growth in India slowing following a period of huge growth, operators may need more convincing to remain in the market than ever before.
Operating in India will always have its challenges (such as government plans to outlaw national roaming agreements between 3G operators), but the government needs to make sure it carries out the reallocation of 2G spectrum as efficiently and as transparently as possible if it’s to avoid a major setback in a mobile market with such clear potential.
The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members