Grand sale - four days left!

What should have been a serious bid to enter India's booming mobile telephony market, with the biggest and the best in the world participating, has been reduced to a garage sale where all that matters is who comes in first. Things have become even more bizarre with Communications Minister A Raja suddenly announcing that the sale comes to an end on October 1. Given that new firms will need to invest $5-6 billion to set up a reasonably-sized mobile business, and maintain a debt-equity ratio of even 2:1, this means serious money "" and Mr Raja expects firms to tie all this up within a week of his setting the closing date. For foreigners trying to enter the market, there is the additional problem of finding an Indian partner who has Rs 2,000 crore to spare (for the minimum 26 per cent Indian shareholding that is stipulated) and then negotiating a partnership agreement in double quick time! All this, it needs to be kept in mind, does not guarantee scarce spectrum, only a place in the garage before the doors are closed behind you.

But it would be wrong to blame Mr Raja alone. The problem begins with the telecom regulator, Trai, not coming up with a serious recommendation on how firms should be allotted the spectrum radio waves that are soon to be freed up by the defence forces, and which mobile phone firms need in order to offer wireless services to subscribers. Had Trai recommended an auction for this spectrum, none of the present drama would have happened since only serious players would have come in. But since there are no allocation parameters, everyone and his uncle is throwing his hat in the ring "" the ministry has set up a committee to now come up with recommendations on what the allocation criteria should be. There are already 200 applications for spectrum from, if you please, even real estate firms. And we're still counting.

Apart from reducing things to a garage sale, there are legal and other implications to Mr Raja's decision. When there was no formal announcement inviting applications within a specified time frame after which no more would be entertained, announcing a closure date does seem strange (it was announced a few days ago, effectively giving firms less than a week to get their papers together) since it gives an advantage to the few who already have their applications ready. It is equally strange that a closure date should be announced when a government committee has been set up to figure out what the criteria should be for allotment of spectrum. If, for instance, the committee recommends that any new applicant must have at least five years' experience in operating telecom services, it is possible that several of those in the garage may not qualify and several firms who could have qualified may still be outside the closed door. In any case, since Trai specifically said there would be no cap on the number of mobile phone service providers, the government cannot unilaterally put a cap on the number "" which is what putting a last date for applications amounts to.