Aircel and Tata Teleservices Ltd (TTL) may find it challenging to bid
for airwaves in the coming auction with the inter-ministerial committee
(IMC) on spectrum
auction reiterating its decision on net worth eligibility of bidders.
The committee has retained its earlier decision, where it had made it
clear that only those with net worth of over Rs 100 crore, irrespective
of whether they were holding spectrum or license
or were new entrants in a band or a circle, could participate in the
upcoming airwave auction. For the North East region and J&K service
area, the net worth requirement for companies has been fixed at Rs 50
crore.
The telecom panel is of the view that strong balance sheets of those bidding for airwaves would ensure efficient roll out of quality telecom services.
Bengaluru-based telecom professional G Krishna Kumar said while IMC was justified in wanting to invite financially strong players, it should have also taken into consideration how the current competitive market had eroded the net worth of many of them.
"The criteria of having companies with healthy balance sheets to participate is good as it can help in maintaining requisite quality of service. However, due to the highly competitive market, telecom companies have paid exorbitant prices," he said.
Citing example of state-owned telecom company BSNL, he said positive net worth wasn't always necessarily an assurance on quality of service; "BSNL has positive net worth but their quality of service has been wanting".
Kumar said to make the telecom sector healthier, the government needed to address the areas: One, to make available more spectrum and two, reduce the intense of competition that currently exists in the market. "There has to be more spectrum availability. Currently, Indian telcos have less than 20% spectrum compared to their peers in other country. Secondly, we still have 8-12 players in each circle. I think government needs to help with easy M&A (merger and acquisition) guidelines, which will help the overall industry and also the general public," said Kumar.
A note on the minutes of IMC meeting, held late last month, says the committee had decided to hold on to its earlier view on the net worth as it felt lower availability of funds with a bidder would lower its capacity to raise funds, which in turn could hamper smooth running of its operation, expansion plans and quality of service.
It also felt that it was in line with the existing principle related to net worth requirement in the Unified License conditions for authorisation of additional services. However, it has clarified that the criteria did not "preclude" bidders with negative net worth: "Bidders have option of getting the net worth of such promoters of the company counted for participation in the auction for allotment of spectrum, who have directly in their name at least 10% equity share in the total equity of the company".
One of the reasons put forth by the panel was that in view of the government's Digital India initiative it was crucial to ensure the financial strength of bidder for faster roll out of services. Kumar said Digital India was already gaining traction with reports suggesting that there will be 10-15 million 4G (fourth generation) subscribers in India by next year.
The telecom panel is of the view that strong balance sheets of those bidding for airwaves would ensure efficient roll out of quality telecom services.
Bengaluru-based telecom professional G Krishna Kumar said while IMC was justified in wanting to invite financially strong players, it should have also taken into consideration how the current competitive market had eroded the net worth of many of them.
"The criteria of having companies with healthy balance sheets to participate is good as it can help in maintaining requisite quality of service. However, due to the highly competitive market, telecom companies have paid exorbitant prices," he said.
Citing example of state-owned telecom company BSNL, he said positive net worth wasn't always necessarily an assurance on quality of service; "BSNL has positive net worth but their quality of service has been wanting".
Kumar said to make the telecom sector healthier, the government needed to address the areas: One, to make available more spectrum and two, reduce the intense of competition that currently exists in the market. "There has to be more spectrum availability. Currently, Indian telcos have less than 20% spectrum compared to their peers in other country. Secondly, we still have 8-12 players in each circle. I think government needs to help with easy M&A (merger and acquisition) guidelines, which will help the overall industry and also the general public," said Kumar.
A note on the minutes of IMC meeting, held late last month, says the committee had decided to hold on to its earlier view on the net worth as it felt lower availability of funds with a bidder would lower its capacity to raise funds, which in turn could hamper smooth running of its operation, expansion plans and quality of service.
It also felt that it was in line with the existing principle related to net worth requirement in the Unified License conditions for authorisation of additional services. However, it has clarified that the criteria did not "preclude" bidders with negative net worth: "Bidders have option of getting the net worth of such promoters of the company counted for participation in the auction for allotment of spectrum, who have directly in their name at least 10% equity share in the total equity of the company".
One of the reasons put forth by the panel was that in view of the government's Digital India initiative it was crucial to ensure the financial strength of bidder for faster roll out of services. Kumar said Digital India was already gaining traction with reports suggesting that there will be 10-15 million 4G (fourth generation) subscribers in India by next year.
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