Those who can not remember the past are condemned to repeat it, "the saying goes. Government policy has left much to be desired for India's telecom sector over the past 25 years. Not only have errors been replicated, but the industry has also had to deal with various policy flip-flops.
The upshot: the present government is considering another relief package for the industry exactly two decades after the government's relief package for the industry through the 1999 New Telecom Policy. Furthermore, from the looks of it, Indian telecom again seems to be heading towards a duopoly market, which is ironic since that's how it all started for the industry.
THE FIRST CRISIS
Back in the P.V. back in 1994. The government of Narasimha Rao opened the doors for private companies to offer mobile cellular services, restricting licenses in each service area to two. The market, as planned at the time, was by design duopoly. Through a Beauty Parade, which evaluated aspiring telecom companies on technical and financial parameters, the companies that won the first licenses were selected.
As a result, it was found that the fixed license fee they agreed to pay to the government was excessively high in hindsight
THE WAY OUT
In 1999, the government finally agreed and released the New Telecom Strategy. Companies were given a so-called migration plan, allowing them to clear license fees up to 1999 and switch to a revenue-sharing arrangement with the government for the remaining license period.
In effect, the government became a stakeholder in the business.
"It has been as much a change in policy as it has been a settlement. There has been giving and taking on both sides and withdrawal of all litigation. The government also got a piece of the bargain as it no longer had to think about court cases, "said Mahesh Uppal, director of the communications consulting company Com First India.
FY08 was the industry leader's peak in terms of ROCE. The boom has been too good to last, as it turns out.
THE NEXT CRISIS LOOMS
After A in 2008. Raja's tenure as telecom minister, 2 G spectrum and licenses were awarded to operators on a first-come, first-served basis at a price discovered in a seven-year auction. The country's telecommunications policy was changed overnight from one that promoted limited competition to one of unbridled competition.
A document submitted by India's Comptroller and Auditor General reported that 2 G licenses were given at throwaway rates to telecom operators, causing an estimated loss to the exchequer of 1.76 trillion. Eventually, 122 telecom licenses and the associated spectrum allocated in 2008 were canceled by the Supreme Court in 2012, claiming the allocation process was flawed.
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