The Government has set an ambitious target of raking in nearly Rs 40,000 crore from the telecom sector primarily by selling spectrum. This includes sale of 4G-based broadband spectrum and 2G airwaves vacated by the 122 licences cancelled by the Supreme Court.
BSNL had surrendered 20 Mhz spectrum in some of circles, which will be put up for sale. It also includes potential income from charging operators with more than 6.2 Mhz spectrum.
While this money will be crucial in Finance Ministry's attempts in bringing down the fiscal deficit, the industry is in no mood to make such investments given the financial pressure they have been under over the past year.
“I am very sceptical about the amount which the Government is hoping to get from the auction. The industry is going through a very bad phase financially and the Budget has not given any relief to the operators,” said Mr Rajan Mathews, Director General, Cellular Operators' Association of India.
None of the demands made by the industry body has found mention in the Budget. “It is very disheartening that there are still no provisions to support the industry which has been acknowledged as a vital contributor to the nation's economic health,” he added.
In the Budget 2011-12, the Government had expected to get Rs 30,000 crore but the revised Budget estimates shows that it got only half of it. In 2010, the Government had managed to get over Rs 1 lakh crore from selling 3G and broadband wireless spectrum but since then the industry has slowed down.
“Operators do not have cash flows to invest Rs 40-50,000 crore every year on buying spectrum. In addition, the Budget proposals on Service tax and withholding tax on cross border software procurement will have a negative impact,” said Mr Prashant Singhal, Partner (Telecom), Ernst & Young.
However, the Government could still generate the projected income if the auction rules are tweaked in such a way that it promotes investment. “The Government has various tools to ensure it gets the money. If the auction rules allow new players to bid then you might see interest from some of the international operators looking to enter India,” said Mr Alok Shende, Principal Analyst, Ascentius Consulting.