Telecom: Four is Certainly A crowd

TELECOM
Four is Certainly A crowd

The issue of the fourth licences promises to be no less messy than the first. With the odds stacked against the fourth operator, will it be worth it?

By Suveen K. Sinha

By the time you get to read this, the third and final bids for the fourth cellular licences would have been opened and the successful names announced (both are scheduled for July 19). But one needn't wait for the day to predict that the issue of the fourth licences will be no less 'exciting' than that of the first way back in the mid-1990s (was it really that long ago?), or the opening up of basic services.

The bids are intriguing. And the most intriguing were Reliance Industries'. The Ambanis bid for the same 15 circles through two different companies: Reliance Communications and Reliable Internet. The first withdrew its bids when dot said two companies, fully or partly owned by the same promoter could not bid for the same circle.

Significantly, BPL Communications' merger with Birla-AT&T-Tata was announced a day before the submission of bids. Reliance may have thought the rest of the industry was ganging up against it and placed multiple bids to hedge its position. While that hasn't happened its rivals in the bidding process do have some reservations over Reliance. This was meant to be ''multi-stage informed'' bidding process, they argue. But, while Reliance is well informed about others' bids, others don't have a clue about Reliance's.

There is a pattern-it's difficult to put a finger to it-in the bids of Bharti and Essar-Hutchison. One has stayed away from the circles the other has bid for, except Maharashtra. But Maharashtra is not the same as other circles. Following the mega merger, incumbent BPL-US West is putting its licence up for sale. That is expected to go to either Bharti or Hutchison. The other can come in as the fourth operator. The bid amounts tell more. Bharti's is Rs 102.56 crore; Essar-Hutchison's, Rs 103 crore.

There's also the threat of litigation. A public interest litigation has been filed before the Delhi High Court challenging the mechanism of issuing the licences. The court said the PIL was filed without basis, but has nevertheless scheduled another hearing for July 23.

On a more blasé note, bids for 13 non-metro circles in 1995 (metros were already taken) amounted to a whopping Rs 1,000 crore. The highest bids for the same circles this time total no more than Rs 800 crore.

This is no surprise. There won't be much of a market available to the fourth licensee. Less so, one and a half years down the line, when they will be in a position to start their services. This gives incumbents enough time to fortify their positions. One can legitimately expect the introduction of every new service possible in the interim. Already declining tariffs may dip further. That takes away from the fourth licensee the two crucial weapons in any market battle: price and differentiation. Incumbents can already be heard boasting: ''What is it they (fourth operators) can offer that we can't?''

The only possible gain for the fourth operator could lie in the realm of access to capital. Five of the six bidders already operate cellular services. The fourth licences will increase their footprint-a crucial factor for fickle investors.

Little wonder then that Delhi, where Essar and Bharti are well entrenched, has got the highest bid of a mere Rs 90 crore (by Reliance), which is less than what some non-metro circles have received.

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