Existing big players such as Bharti Airtel, Vodafone, Idea, Reliance and Tata have to bid for the spectrum as 3G is an expansion of their existing services. In the absence of new global players, they will get spectrum at about the reserve price.

New operators will get low valuations:

Economic slowdown has an impact on the valuations of new service providers such as Unitech and Datacom. Both will get low valuations for their companies. Valuations will be much lower than what they would have got if they had sold their equity about three months ago. Swan was lucky as it sold its 45% equity for $1.1 billion.

The new operators will also face problem in raising funds for the project at least in the short term. They will have to depend on the investment brought in by their foreign partners.

Existing players will have to curtail their expansion plans:

All the existing telecom players will keep a check on their expansion plans. In last few years, the operators had drastically expanded their networks. With credit becoming difficult and rupee depreciating to the new low of Rs 49 to a dollar, they will have to limit their expansion plans.

Equipment manufacturers will not be able to offer sops to operators:

In view of rupee depreciating by about 20% in last few months, equipment manufacturers will not be able to offer equipment at a cheaper price to the telecom operators. Generally, Indian telecom service providers get equipment at a competitive price. Under the new scenario, the prices are set to go up. It will also be difficult for them to offer vendor’s credit to telecom service providers, which is a common practice in the industry.

Therefore, the global economic slowdown will have serious implications on the growth of telecom sector in India.

VAS companies will have to earn revenues:

Most of the VAS companies are playing valuation game. The management was more focused on the valuations rather than the revenues and profit. Now with the meltdown in stock markets and grim situation in the USA, VAS companies will have to earn revenues to sustain their operations.