Telecom Industry: 3 cheers to 2G verdict?

So, finally the cat is out of the bag. Through a drastic as well as unprecedented judgment,   the Supreme Court has cancelled all the 122 2G licenses issued in January 2008. Some may say that the crook corporates got what they deserve, whereas others might say that it wasn't fair to paint everybody with the same brush. Let’s try to discuss the major fall outs of this landmark judgment.

The credibility of the government has gone for a toss: Despite the UPA putting up a brave face, some might say shamelessly, and shifting the entire blame on A Raja and policies of the NDA government, there is no doubt that the Indians don’t have much confidence left in the Manmohan Singh’s government now.

The Indian corporates are under the scanner as well: Even though the Indian corporates haven’t been known for their openness and integrity but despite that the focus of most if not all anti-corruption initiatives have been the political class. One may not be surprised if the business-class too faces the music in the near future. Even the foreign firms that are looking to enter India would be more circumspect before selecting their Indian partners. After all the 2G case sullied many global brands e.g. Telenor as well.  

Telecom Industry will get a new lease of life: Despite the criticality and the growth potential in the telecom sector, this sector had been staring down the barrel due to various issues like the 2G controversy, not so successful 3G rollout and government’s stand on policy matters e.g. roaming licenses for 3G. With the spectrum up for auction again, there will be an opportunity for “serious players” to acquire bandwidth at a more reasonable price as I don’t expect a similar frenzy and madness that preceded the 3G auction. The sector is important as given its reach and capabilities, it will be responsible in shaping India’s growth in the coming few years.

The Industry will move towards consolidation: As discussed in one of my earlier blogs that the presence of too many players wasn’t helping the telecom industry as players with large subscriber base have too little spectrum given their requirement instead those with little or no subscriber base were sitting on these precious resources. While competition couldn’t force these black sheep out of this sector, the legal intervention may very well do that. One may not be surprised by these developments as telecom industry, even globally, has been known to have 2-3 players accounting for a major share of the market e.g. AT&T and Verizon in US, China Telecom, China Unicom and China Mobile in China etc.

While it would be tough to expect that the same/similar sets of regulators, politicians and policy makers would be able to provide a fair platform for the industry players. But at least, we can hope for the best after all “Hope is the last thing that dies”.