Sunil Jain: When 13=120

PERSPECTIVES

Panicky investors looking for the best investment option in today’s troubled times would do well to invest in telecom licenses, the best return money can get anywhere in the world. Eight months ago, the ministry of communications decided it would give away spectrum for 120 telecom circles across the country (since each state is a separate circle, that works out to a little over five pan-Indian licenses) for the same price paid for the fourth cellular license in June 2001 when there were 4 million mobile subscribers in the country, a number achieved in a fortnight today.

While a pan-Indian license cost Rs 1,651 crore, Swan Telecom paid a lower Rs 1,537 crore in January this year since it bid for only 13 circles. Since UAE firm Etisalat has bought a 45 per cent stake in Swan for $900mn, Swan’s licence is worth Rs 9,000 crore. So, what the government got for 120 circles, Swan got for just 13. Since Swan has yet to get any subscribers (under the license conditions, it has to cover 10 per cent of all district headquarters within a year), the entire valuation is for the licence which it got at a bargain-basement price along with 4.4 MHz of spectrum. Based on this, the effective loss of revenue to the government is Rs 43,700 crore.
 

Spectrum Scandal
Government equation:
Number of circles sold	120
Amount received (Rs crore)	9,000
Swan equation:
Number of circles sold	13*
Amount paid (Rs crore)	1,537
Amount received (Rs crore)**	9,000
*Swan has actually got spectrum for only 10 circles, making the equation even better from its point of view ** Based on Etisalat bid of $900 mn for 45 per cent of Swan’s equity