End of the telecom honeymoon?

Mon, 25 Apr Pre-Open

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The telecom space in India was touted as one of the highest growth sectors in the country. This was way back in 2008. The sector was seeing its subscriber base grow at a phenomenal rate of 74% (compounded annual growth rate, CAGR, from 2005 to 2008). And the growth in the subscriber base was visible in the growth in revenues for the telecom operators. India's largest telecom operator, Bharti Airtel, saw its revenues grow by nearly 59% (CAGR) during the same period.

So it was not surprising that everyone wanted to set up their own telecom operations in the country. Be it domestic players or international ones. There was a long queue for the 2G spectrum and license that was to be given out by the government in 2008. Even companies which had no prior experience in telecom were suddenly interested in setting up a telecom shop. Even real estate companies like Unitech and DB Reality joined the cue. The competition for the license was so intense that some of these companies resorted to any possible means in order to obtain the license. And this formed the roots of the infamous 2G scam.

As a result of this, there were several companies that now had a telecom license but had no clue how to set up operations. They went ahead and invited foreign partners. These partners were some of the biggest names in the global telecom industry. They had deep pockets and years of expertise. It was now being touted that the Indian incumbent operators would start seeing worsening days. The international players were expected to and did change the scene. Rates were now becoming increasingly competitive as these new operators went all out to garner market share. It seemed for a while that the newly formed alliances would shine over the old incumbents.

But jump to 2010, these partnerships came under the scanner as the government started investigating into the dealings of the 2G scam. As days passed, names were being shouted out and more recently heads have begun to roll. Just a few days back, the honchos of Unitech and DB Reality were sent to jail on the charges of bribery and forgery. (These were the heads of Unitech Wireless and Etisalat-DB Reality telecom operations). Following this, Telenor, the Norway based telecom group that is the partner for Unitech Wireless, has asked the Chairman of Unitech to step down from his post as Chairman of Unitech Wireless.

We all know that relationships that are based on lies and deceit do not go a long way. Such seems to be the case for the telecom partnerships that were formed out of the 2G scam. With the unfolding of such events, it appears the newly formed partnerships are now coming to an end. For now it appears to be the end of the honeymoon that these companies were enjoying.