May 19, 2010

False Hypes

The Government of India is almost going to be able to wipe away its entire deficit with the money it's getting from the auctioning of the 3G spectrum — 67,000 crores plus or whatever.

It's all a false hype of course. I am sure that the government is not going to receive all that mullah. The companies will take us all for a ride. This has happened before too.

Recall when the original licensing happened for starting mobile telephony services in India, companies promised to pay outrageous amounts to the government for acquiring a license. And once they had got the license, they simply told the government that they are unable to realize their revenue projections and hence they would go bankrupt if the government were to insist that they pay their 'committed' license fees. The government of course took pity on the companies and they were left off the hook. So, basically the companies made a promise and then reneged on that promise without paying any penalties whatsoever. Then, we saw the onset of the 'revenue sharing' formula.

That's how early 'pioneers' entered the telecom sector in India and made a killing by being early birds.

The same thing is going to happen with all these promises of 3G licensing fees. Companies who do get licenses will plead with the government later that their 'projections' were rather unrealistic and they are not getting the kind of revenues they were hoping to get and therefore it would be 'unrealistic' for the government to expect the companies to cough up what they had promised to cough up.

Wait six months. Wait a year. Wait three years. Let me assure you, this is what is going to happen. Nothing more, nothing less. And then I will say: 'I told you so.'

Jai Ho India!

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