BREAKINGVIEWS - Airtel, Vodafone boosted by Supreme Court telecoms ruling

MUMBAI Thu Feb 2, 2012 4:33pm IST

A labourer cleans a Bharti Airtel advertisement billboard installed on a truck in Kolkata November 19, 2010. REUTERS/Rupak De Chowdhuri/Files

A labourer cleans a Bharti Airtel advertisement billboard installed on a truck in Kolkata November 19, 2010.

Credit: Reuters/Rupak De Chowdhuri/Files

Related Topics

Stocks

   

MUMBAI (Reuters Breakingviews) - The Indian taxpayer may have lost billions of dollars as a result of the 2G telecoms scam. But the Indian consumer has been a great beneficiary. Since the introduction of new players with cheap licences, India has become the world's second largest telecoms market with the lowest tariffs. The cut-throat competition, though, has been bad for business.

The Supreme Court's order to revoke all 122 licences awarded in 2008 will change this picture. It will hurt those using spectrum awarded in that scandal-ridden sale -- even those such as Norway's Telenor (TEL.OL) and Abu Dhabi's Etisalat which bought stakes in companies holding the licences after the event. By contrast, those who are relying on earlier licences -- notably Bharti Airtel (BRTI.NS) and Vodafone (VOD.L) -- should benefit as the market consolidates and threadbare margins rise.

Since 2008, the low cost of spectrum and the overcrowding of the market has seen margins in the sector savaged. India has more than a dozen operators and 894 million subscribers. Average revenues per user for market leader Airtel are down 45 percent from their September 2008 level.

The Supreme Court ruling means a reshuffling is on the cards. Firms using spectrum awarded in 2008 spectrum have only four months to continue operating their licences. Meanwhile, the government will have to decide how to reissue the spectrum -- with a new auction being one option.

Some operators could end up without a licence and have to flog their assets to a rival. Others could incur debts to pay for spectrum and still have to sell. The government's new telecoms policy makes consolidation easier than it was when the licences were awarded. Even when operators don't sell, the higher costs will make it harder for them to offer such cheap tariffs.

Airtel and Vodafone, by contrast, look like winners. They may buy assets or spectrum selectively. Even if they don't, they should do well as the market consolidates around them.

The Indian people may celebrate that a corrupt sale has been squashed. But the sting in the tail could be that their phone bills start to rise.

CONTEXT NEWS

-- The Supreme Court on February 2 ordered the revocation of all 122 telecoms licences issued by the government in 2008. The Court said the current licences will remain in place for four months, during which time the government should decide a new system for issuing licences, a lawyer involved in the case said.

-- The licences affected include all those held by Unitech Wireless, the Indian joint venture of Norway's Telenor and Unitech. Also affected are: Loop Telecom; Videcon Telecommunications, part of India's Videocon group; Etisalat DB, the joint venture between Abu Dhabi's Etisalat and India's DB group; S-Tel; 13 licences held by Idea Cellular; and three held by Tata Teleservices.

(Editing by Hugo Dixon and David Evans)

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

Sensex, Nifty rise to second consecutive record high

Sensex, Nifty rise to second consecutive record high

The BSE Sensex and Nifty on Friday rose to their second consecutive record highs. The 30-share Sensex surged as much as 1.52 percent to an all-time high of 27,762.13. The broader Nifty gained as much as 1.49 percent to a record of 8,291.65.  Full Article 

REUTERS SHOWCASE

Ban on E-Cigs?

Ban on E-Cigs?

Govt considers ban on e-cigarettes, sale of single smokes.  Full Article 

Commodities

Commodities

Silver futures in India hit four-year low on global cues.  Full Article 

BOJ Policy

BOJ Policy

BOJ shocks markets with surprise easing as inflation slows.  Full Article 

Cost Cutting

Cost Cutting

PM Narendra Modi boots officials out of the first class cabin  Full Article 

Leisure Riding

Leisure Riding

Harley-Davidson woos affluent young Indians with bike culture  Full Article 

Shadow Banking

Shadow Banking

China's shadow banking sector growing rapidly, third largest in world - FSB.  Full Article 

Moody's on India

Moody's on India

Moody's welcomes India's policy steps, but wants to see more.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage