The Economist has a handy chart on the effect of the Supreme Court’s ruling on different telecom operators:
Least we forget, the ham handed sale of 2G spectrum had the perverse effect of unleashing a price war as the new acquirers of below market spectrum went on a customer acquisition tizzy. Airtel was the biggest loser with ARPU sliding from Rs. 292 in 2008 to Rs. 187 in Q3 2011.
The new entrants – Uninor, S Tel and later Videocon were willing to work at Rs. 15-40 ARPU to gain market-share. But with them gone had having to bid for spectrum in an auction, the old schoolers – Airtel, Vodafone, Aircel and RCom – should be able to increase ride the “reversion to mean” of mobile subscription rates.
This is the story of how Norway’s equivalent of India’s BSNL got involved in a $40bn telecom scam. The Indian Supreme Court cancelled 122 2G licenses given on a no-bid basis in 2007. Yes, we are talking about something that happened 5 years ago for technology that’s 10 years old. But the fascinating part is that the spectrum was first sold to a real estate company called Unitech about for $365.42 million which then turn around and sold a 60% stake in its wireless division to Norway’s Telenor for $1360 million! I’m sure some people were feeling pretty smart about turning in a 270% profit for their “navigating” skills.
The minister, A. Raja, who sold the spectrum is a nobody from South India representing a grand total of one million voters. It must be a pretty fascinating journey for him coming in #2 in Time magazine’s 2011 list of “Top 10 Abuses of Power” list (just behind the Watergate scandal).
The underpriced spectrum giveaway unleashed a price war where SMS and voice tariffs in India were hammered down to the lowest in the world. Telenor had planned to invest about $3 bn in India and is said to be almost 2/3rds there. So that’s $2 bn that just got vaporized. Besides, they had out sourcing agreements with a whole bunch of Indian BPOs. Wipro is said to have $550 million worth of deals.
Its funny how Telenor, one of the top performers on the Dow Jones Sustainability Indexes for the 10th year running, got dipped in Indian curry.
Telenor History, Nilgiris Lok Sabha Constituency), A Raja, 2G Spectrum Scam, Uninor, IT BPOs Hit