Welcome Guest Login | Register | Site Map | | Make TelecomTiger my homepage     
Telecom News
Enterprise |  Policy & Regulation |  Mobiles & Tabs |  Corporate |  VAS |  People Movement  |  Technology  |  LTE



Telecom operators want everything free in the name of consumers, comments Syngal on spectrum auction

BK Syngal
Former, CMD, VSNL
  BK Syngal |  Guest Writer | 18/02/2014

It was expected from the incumbent telecom operators. After auction, the usual innuendo of slogans like – winner’s curse, spectrum prices are high, it will kill investors’ interests, tariffs will increase – has begun. This is the most unfortunate behavior of Indian industry.

The industry wants everything free in the name of consumers. Before I proceed further, I would like to draw a few parallels with oil and power industry. The oil barrel at one time used to be at $10. It is $100m today.

Similarly, for the power industry, the cost of coal and gas is always increasing. For the steel industry, cost of iron ore, coal and water is determined by the market.

Yes, indeed, the tariffs also increase. But then this is part of life and this option is available to telecom operators also.

A property that could be bought for a few lakh in mid 1980s costs a few crore today. Similarly, the wages that were at two to three digit levels in mid 1960s have grown to six to seven digit levels.

Therefore, it is entirely misplaced to say that the prices of spectrum in this auction are very high.

As I mentioned in my early articles, in 2001, the cost of spectrum was 80 paise per minute per customer. This has been confirmed by many others. Let us now focus our attention on the impact of latest round of spectrum auction for three metro cities. The total cost of spectrum paid is Rs 23,000 crore.

This comes to about Rs 230 crore per month for an asset acquired for 20 years. In accounting terms, because of depreciation on capex, it will show as Rs 120 crore. This comes to Rs 4 crore per day. In 2013, there was a customer base of six crore in the three metros, according to Cellular Operators Association of India (COAI). There was an average revenue per user (ARPU) of Rs 5 per day. This results in earning of about Rs 30 crore per day.

What is the problem if companies spend Rs 4 crore on spectrum, when they earn Rs 30 crore per day.

Now view it from another angle.

In 2013, minutes of usage per customer were 360 minutes per month. This translates to about 12 to 15 minutes per day per customer. This means that the cost of spectrum is only 4 paise per minute.

I challenge self styled analysts and experts to point out mistake in my calculations. If you cannot find any problem in this explanation, it is clear that someone is fooling someone. An atmosphere is being created in seeking subsidies at a later date. I do not agree that this is the expensive auction. Right price has been determined through auction and the operators have secured their future for 20 years.

Following are links of Syngal''s earlier articles and analysis on the issue:- Paid media and analysts are misleading public and the government by calling the current auction “winner’s curse”, writes B K Syngal Paid media and analysts are misleading public and the government by calling the current auction “winner’s curse”, writes B K Syngal

B K Syngal blasts Economic Times on spectrum auction coverage, wonders whether the newspaper is trying to create unnecessary panic

Are Newspapers trying to influence spectrum auction negatively so that manipulators can bring down stock prices, asks Syngal

 mail this article    print this article    Show and Post Comment
Maintain Business Continuity with Cisco ASR 9000 nV Technology
It is a virtual chassis solution where a pair of ASR 9000 routers acts as a single device by maintaining a single contr...read more
Simplify Your Network with Cisco ASR 9000 nV Technology
With the new Cisco Network Virtualization (nV) technology in the Cisco ASR 9000 Series Aggregation Services Routers, se...read more
Cisco Small Cell Solution: Reduce Costs, Improve Coverage
It is designed to address the challenge of mobile service coverage and to expand network capacity...read more
Other Blog
Reduce the IUC: Use pure LRIC methods to calculate interconnection charges
Over legislation is the biggest problem of telecom industry, says B K Syngal
Vodafone-Idea merger: There should be no Spectrum cap for airwaves acquired through auction, says B K Syngal
Reimagining Cloud Security in the Indian Context
Reliance Jio’s strategy of free services has boomeranged, high end customers have left it
Reliance JIo: It may not be a repeat of Monsoon Hungama
The war between Reliance Jio and incumbent operators is following the same old path, with new arguments
Reliance Jio: there is no such thing as a free lunch
Government and consumers to be the biggest beneficiaries of Reliance Jio’s 4G services
Mukesh Ambani’s Reliance Jio responds to the charges of incumbent Cellular Operators led by Sunil Mittal’s Bharti Airtel
Is full mobile number portability (MNP) another big scam? B K Syngal argues that decision to implementation MNP will help only Telcordia and Syniverse and will burden consumers with unnecessary costs
Mismanagement of business by Indian telcos like Tata Teleservices is the real cause of flight of foreign capital and not policy paralysis, argues B K Syngal
The Opportunity That the Telcos Missed
Vodafone tax evasion case and its historical FDI pattern is a classical example of crony capitalism
Disrupt or be Disrupted: Telcos begin upcycling metadata to level US-based OTTs
India's Tryst with Broadband
Stitch in time to save ‘churn’!
The Real Scam