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Weak oil, India's 3G plans & more... - Views on News from Equitymaster
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  • Aug 12, 2008

    Weak oil, India's 3G plans & more...

    Asian stocks down on commodities
    Asian markets are trading weak currently, led by the decline in commodity stocks. This is on the back of plummeting prices of gold (on the back of receding inflation expectations) and oil (on the back of demand slowdown). Stocks in Hong Kong, China, Japan and Singapore are all trading weak. Stocks in the US had closed strong yesterday. While the Dow gained 0.4%, the Nasdaq closed 1% up. As reported on the Bloomberg, gold prices have dropped by 4.2% to US$ 828.3, the lowest since December 24, 2007. Crude oil prices have slumped 21% from the record levels of US$ 147 a barrel touched on July 14.

    MNCs losing charm in India's 3G dreams?
    A leading business daily reports that global telecom majors might stay away from the Indian government's auction of 3G (third-generation) telecom spectrum. These companies have in fact lowered their interest on the back of steep financial and regulatory barriers and uncertain environment for new entrants. As a matter of fact, companies like NTT, AT&T, Deutsche Telecom and Etisalat had shown interest in India's mobile market. Now, reports of absence of these global telecom giants from the bidding process could threaten the government's ambitious plans of netting up to Rs 400 bn from the auction of 3G spectrum.

  • Also read - India goes live with 3G

    While the telecom department's 3G plans sound reformist for the sector as a whole given that this has the capability to make communication even faster, there are several big questions that operators will face once they commercially launch such services. The minimum price for a pan-India 3G license has been set at US$ 470 m (Rs 20 bn), almost double the US$ 250 m minimum price recommended by TRAI (Telecom Regulatory Authority of India).

    Secondly the policy, in giving preference to state-owned service providers - MTNL and BSNL - indicates that only two private operators, alongside these PSUs, will get licenses for New Delhi and Mumbai because of the shortage of spectrum there. In the country's remaining telecom circles, while five operators will be permitted initially, including a state carrier, the count could rise to up to 10 later.

    Easing rules for non-government PFs
    The Indian government is planning to ease rules governing pension funds (PFs). In this context, as reported in a leading business daily, the government may allow non-government PFs to invest upto 10% incremental flows in the stockmarket, up from the current mandate of 5%. While no measure exists of the size of the corpus owned by non-government agencies PFs in India, government estimates indicate that some funds have a minimum size of Rs 1 bn. Also as reported, the finance ministry had first allowed non-government PFs to invest in capital markets in January 2005.



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