It was expectations “over met” at the 3G auction by the Indian Government. It earned Rs.677 billion through the exercise, having expected only Rs.350 billion from the auction – more cash than expected and that definitely is great news for the exchequer. While Bharti, RCOM and Aircel won 3G rights in 13 circles, Tata and Vodafone won in nine. But the winners have a different tale to tell. The auction price, which escalated beyond all measures has proven the spoilsport, therefore creating a huge pressure on their pockets, casting a shadow on their expansion outlook. Says Rahul Jain, IT Analyst at Angel Trade, “Market penetration would be low as it will take lot of time for these company to expand, as they have spend an awful amount of money in paying up for 3G. Their revenues are already majorly affected, and their share prices are going down quarter by quarter as they are lowering down their price levels schemes.” True it is – despite the rejoicing and exaltations, payback is bound to take time. The average revenue per user (ARPU) has fallen greatly in recent years and has proven to be good tidings for the government might just turn into a third generation headache for the telecom companies, for it will take them atleast five long years to break even on this investment; it’s great news for the consumers in the country though.
For more articles, Click on IIPM Article.Sanchit Verma
Source : IIPM Editorial, 2010.
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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