Contemporary concerns study Indian telecom sector: Spectrum auctions and implications

Abstract

The Indian Telecom Industry is currently the fastest growing in the world, growing at about 45% per annum and has reached the status of the owner of the second largest owner of telephone lines. The path to India’s progress in this sector has not been a smooth ride and its success has been the result of a series of reforms which have accelerated since the 1990’s. India began its first spectrum auction in 1991 where it used a sealed bid auction and a fixed license fee payment. The first auction was a failure in terms of its design as well as management. The National telecom Policy 1999 has brought forward a new form of bidding which was an open ascending format along with a license fee which was tied to the revenue of companies. This was the start an era of success in spectrum allocation in India with the recently concluded 3G auction drawing the government an estimated revenue of Rs. 67,719 cores. Moreover, the auction was deemed to be transparent and conducted in an efficient manner, using online interface. Despite all these progresses, there were issues such as the long gap between the time the proposal got cleared and the time the auction actually happened. The delay has been attributed towards the disagreement between the Indian government and the defense sector. There are also many speculations regarding the exorbitant prices paid by the bidders and its potential impact on the companies. An analysis of the auction has been done including its impact on the telecom industry and its key impact areas were – consolidation of the telecom industry, possibility of increase in ARPU, stress on the balance sheet of companies in the short run. The 3G auction in UK and other parts of Europe was also studied and finally, the study concluded with lessons learnt from the past as well as experience of other countries.