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Indian 2G auction turmoil as telcos revolt

Foreign investors blame government

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Allegations of discrimination against foreign mobile operators, unfairly high start prices for spectrum bidders and yet more government delays have thrown India’s 2G auctions into chaos once again over the past few days.

The original 122 licenses, doled out in 2008, were cancelled in February after the Supreme Court ruled widespread corruption during the original bidding process, and a new auction deadline was set for 31 August.

However, the government has now agreed to ask the Court for another three months to prepare the auction, sparking concerns from telecoms operators, according to The Hindu.

“Such delays are a matter of concern to us as they prolong the uncertainties we face,” said Telenor Group in a canned statement. “We urge the government to conclude the auction process at the earliest.”

The Norwegian-owned company’s uncertainties have been escalated by its decision to exit the joint venture it shares with local property developer Unitech, after the partnership soured in recent months.

Several other foreign investors in Indian mobile network businesses have complained to the government about the way they have been treated, arguing that the revocation of their licenses in February amounted to a breach of their bilateral investment protection agreements (BIPAs).

The Department of Telecommunications has now been forced to deny such allegations, in the following communication seen by Economic Times:

The government of India is of the view that this judgement applies on a fair and equitable basis on all licences. It is added that there is no discriminatory policy or practice being applied against the licence where you (the investor) has equity investment. All the issues related to licensing are being dealt with as per the law of the land on a fair and equitable basis.

It’s unlikely that any foreign investors would pull out of a country set to leapfrog the UK by 2016 to become the third biggest smartphone market worldwide, but many are unhappy at the interminable delays, and the inflated prices they’ll be forced to pay for the licenses.

The reserve auction price has been set at Rs 140bn (£1.6bn) for 5MHz of nationwide GSM spectrum in the 1800MHz band. Although this is some way lower than the first estimate, it’s still seven times that of the 2008 auctions and will costs even more for CDMA operators.

Vsevolod Rozanov, CEO of Russian firm Sistema issued a strongly worded statement criticising the decision:

Given the realistic sectoral environment and market dynamics, I believe that the reserve price for spectrum as approved by the cabinet is excessively high. There is no rationale to support why the 800 Mhz CDMA spectrum should be priced 1.3 times more than the GSM 1800 Mhz spectrum.

All of which makes the UK’s painfully drawn-out attempts to hold a 4G auction appear positively incident-free by comparison. ®

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