ManagementParadise.com - Worlds Leading Management Portal. Online MBA | Classroom to Boardroom and Beyond
 
  Articles Details
Print Email  Add to briefcase

A revolution on hold

by Sathya Narayanan on Saturday 22 May 2010, 3:27 PM | Category: Politics| View: 900 views
 
 
Advertisements
 
  Other Articles by: SathyaNarayanan
    A day of the turt
    A STRANGE FACT
    A useful instrument
    Choice of a career
    Core competence and building India
 

This is an article – or else I would term it as a discussion on a recent topic.

 

India is, today, one of the fastest growing nations in the area of telecommunication. For a country which was wallowing in the morass of licence raj, India has come a long way in the field of telecommunication. The development made in the phase between 1997 and 2004 has made India the largest growing telecom sector of the recent world.

 

After 34 days of hype and hoopla, the 183 rounds of special bidding by 9 players, the 3G auctions closed out on May 19 after raking a whopping Rs.67,719 Crore (comes to around $15 billion) for the Government of India! 

 

What was the 3G auction meant for? Was it a step to infuse a general purpose a general-purpose-technology for enriching the knowledge of the people? Or, was it meant to be taxation without representation? So, is this a benefit or a bane to the country? This is what this discussion is about…

 

The Government now expects a revenue of around Rs80,000 Crore with the BWA (Broadband Wireless Access) auction going to take place soon. This was far beyond everyone's expectations as the Telecom minister Mr. Raja predicted a revenue of around Rs.30,000 Crore. And more recently, Finance Minister Mr. Pranab Mukherjee predicted an amount of around Rs.36,000 Crore.

 

With the crude prices too, going down, it has become a double benefit at the right time for the Government. If the crude prices remain at the same level till the end of this year, then, the fiscal deficit of the Government would come down from 5.5% to less than 5%  within an year!

 

A similar 3G auction in the UK had raised $30 billion for the Government. So here, for a comparatively developed telecom market (in India) over the last 10 years, this is a surprise result. Or, is it? What does a cost-benefit analysis suggest?

 

A closer  examination of facts show ambivalent responses to the results are required. In India, the total mobile sector revenue last year was $20 billion. This 3G auction now has raised $15 billion, which means, it has accounted for 0.75% of the annual revenue. Assessing the UK scenario a decade ago, the entrants there had paid $30 billion with the revenue of $8 billion. So, the firms had paid 3.75 times the annual revenue. The disparity between UK and India in proportion of bid value to annual revenue is 3.7 times.

 

But, the Average Revenue Per Unit (ARPU) of UK from this has been $30 a month. In India, it amounts to be $4 per month. So this turns out to be 7.5 times in UK's favor! So, is this 3G spectrum deal good for Indian companies and consumers?

 

In terms of profits, clearly, the UK firms held an advantage over their Indian counterparts. But, the outcome of 3G auction in UK was disastrous. Because, the companies had no money after that to pay for the spectrum license and interest. They had gone nearly bankrupt! So, the 3G technology did not diffuse there for a decade!

 

A premier telecom company in UK sold out its wireless communication business totally for the sake of acquiring 3G spectrum license. A similar scenario may also happen in India

 

In that case, the companies may choose not to pay and walk away leaving their security deposits. The Government will suffer a huge loss then. A similar situation happened in India when mobile revolution started in India in mid 1990's and continued till late 1990's when the situation stabilized. In Japan and South Korea, extremely low prices led to complete diffusion of modern technology. So only the products from there today are cheap. These ideas are worth emulating.

 

So, there is a chance that India might lose a knowledge revolution through the 3G technology because of these reasons. 3G auction is a boon for Indian Government's exchequer, but what will it turn out to be, for the common man? Time will tell.        

  

 

 

 

 

Advertisements
Print-Friendly Version Email to a Friend
 
Related to A revolution on hold
 
 
 
 
 
 
STATS
 
Total articles: 5707
    Total Categories: 22
    Updated in Last Week: 20
LOGIN
 
   Login Id
   Password
  Forgot Password?
    
   
SEARCH ARTICLE
 
  Enter Keywords
 
CATEGORIES
 
    Banking and Finance
    Campus Articles
    Economy
INVITE FRIENDS
 
Invite your Friends, your Colleagues, your Group Members, your Seniors, your Team mates...and others.
 
 
Advertisements
 
spacer gif
Management Paradise
spacer gif
arrow gif About Us
Press
Jobs
Buy a Book
Kartik Raichura
spacer gif
spacer gif
spacer gif
Legal
spacer gif
spacer gif Terms & Conditions
spacer gif Privacy Policy
spacer gif Disclaimer
spacer gif Copyrights
spacer gif Contact Us
spacer gif
spacer gif
spacer gif
Help
spacer gif
spacer gif Getting Started
Support
FAQs
Tour
Feedback
Partners

MBA B School Blog

MBA Buy Entrance Exam Forms

MBA BMS Blog

MBA MBA Blog

MBA BMM Network

MBA Your Link Here

Follow
       
   

 

Copyright 2004 - 2014 Management Paradise. Site Developed by Available.co.in