The Hindu Business Line : Windfall gains for new players

The Government’s decision to give out fresh telecom licences on first-come, first-served basis has resulted in windfall gains to some Indian promoters of new telecom companies. Unitech, which has sold its 60 per cent stake to Telenor, has made a profit of Rs 4,470 crore.

Last month, Swan Telecom sold 45 per cent stake to the UAE-based Etisalat for Rs 4,100 crore ($900 million). This was Rs 2,450 crore more than what its promoters paid to acquire the licences in February. Unitech also had acquired licences for 22 circles by paying Rs 1,650 crore to the Government.

While it is not uncommon for Indian telecom companies to receive huge valuations, the amount received by these companies is unprecedented as neither of them has a single subscriber nor any infrastructure.

“Clearly the international players who are desperate to get a foothold into the booming Indian mobile market are putting a huge value to the spectrum. This is a form of spectrum trading which should not have happened. The Government would have got this money if it had opted to go for an auction,” said Mr Romal Shetty, Director, KPMG.

However, new players said that the valuation was not just for spectrum but also for the market opportunity as the Indian mobile-user base is expected to surge to 700 million by 2012.

“It is unfair to say that the promoters of the new companies are making profits for doing nothing. First, they have managed to get the licence legally despite heavy competition. Second, they are giving a window to international players whose traditional market is seeing flat growth,” said the owner of a new telecom firm.

The next in line to reap windfall gains could be the Dhoot family and Mr Mahendra Nahata, who have said that they are scouting for a partner for Datacom.

In January, Mr Venugopal Dhoot, Chairman, Videocon Ltd, had said that Datacom had got a number of suitors for buying a stake in the company.

A number of international players such as AT&T, Deutsche Telecom, Telecom Italia and NTT DoCoMo are possibly looking at an entry into the fastest growing telecom market in the world.