Will telecom survive?

Telecom has been the one success story in the past decade. The first round of licenses were given away cheaply to a multitude of companies resulting in fierce competition so that charges were among the cheapest in the world, benefiting subscribers. Today there are 900 million subscribers and even manual laborers carry cell phones. But since the Congress led government came into power in 2004 there have been relentless attacks on the telecom sector. Coalition partner DMK was given the telecom ministry and indulged in rampant corruption in the distribution of 2G licenses, all of which have been cancelled by the Supreme Court. 3G licenses were auctioned off to the highest bidders netting Rs 1 trillion for the government which was promptly wasted on social schemes instead of reducing the fiscal deficit. Our most revered Telecom Minister, Kapil Sibal said," 3G has not delivered because they paid such huge prices for the spectrum and there is no liquidity in the market for them to invest in the infrastructure and the devices to deliver 3G, for which 2G was successful and 3G was not successful." To provide a seamless service companies have resorted to sharing spectrum, in that, a subscriber moving to another circle is switched onto the company which has license for that circle. The revenue is probably shared. The government has now come out with an order forbidding such sharing probably because it wants companies to pay for licenses for every circle. This is not just immoral but plain wrong because companies have every right to share resources. Recently the Australian airlines, Qantas signed a 10 year route sharing deal with Emirates and will shift its regional hub from Singapore to Dubai. Even in telecom you can phone someone who subscribes to a different company and the companies share the price of the call. In an interview with TOI on 27 September, CEO of Vodafone India said," India was by far the biggest market in terms of size and potential but South Africa proved to be financially more profitable." And again,"....we made an investment of Rs 500 billion ( including Rs 116 billion on 3G spectrum acquisition ) in this period, of which the government got Rs 450 billion. Shareholders got nothing." He says," The problem is that people are broke, the industry has a debt of an estimated Rs 2 trillion. So at the moment your balance sheet is stretched and you cannot service your debt. But that reality has not landed with the government, which is a pity." Indeed the government is planning to take advantage of the crime committed by it coalition partner by auctioning off the cancelled 2G licenses. The base price has been set at Rs 140 billion. Companies will be forced to raise call charges hugely impacting the poor. For the first time the number of subscribers has dropped by 20 million. Like leeches politicians are sucking the blood out of people. Unlike leeches their greed is insatiable.