3G spectrum auction deferral leads to $16 Billion loss

By siliconindia   |   Wednesday, 03 June 2009, 15:37 IST   |    2 Comments
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3G spectrum auction deferral leads to $16 Billion loss
New Delhi: The continuous deferral of 3G spectrum auction has resulted in a loss of $16 billion, as per a study. The losses are incurred in terms of direct investments and notional productivity gains. The findings are based on study conducted by LECG, a global consulting firm. "The Indian market has been ready for 3G for a long time. Many of the operators have been planning to launch 3G services since 2005," Jaikishan Rajaraman, Senior Director with the GSM Association told Mint. The delays are mainly caused due the difference between the government and the department of telecom (DOT) on the reserved price, which has to be charged. "The more you delay the auction, the greater is the cost of capital at a later time when the auction does happen," said Rajaraman. According to him, investments in 3G in India would lead to an economic benefit worth around $70 billion. The onset of 3G services is usually accompanied by an increased usage of mobile broadband (or high speed Internet services). For every 10 percent increase in the broadband penetration, there is an increase of 0.1-1.4 percent in the country's gross domestic product (GDP). There are a number of variables that can be included in losses due to the delay in auctioning 3G services said an expert. "These could be revenues that could have been garnered from subscribers added, licence fees, spectrum fees, direct and indirect employment, revenues to the value added services operators, handsets sales and even income tax to the government," Mahesh Uppal, director with Com First (India). On 1 August, DoT had announced details for the auction for such data-intensive services, with a deadline of 16 January. This was initially postponed to 30 January, and then deferred indefinitely. Finally, the telecom head has proposed the auction by the end of this year. "The auction should happen by September or October if there are no hurdles in the next few months," an official at DoT said, asking not to be identified. This person added that most of the issues appear to have been sorted out.