More in the press today about the alleged $39B the Indian government "lost" due to corruption in the country's 2G auctions 3 years ago. Although the machinations of the notoriously Byzantine India legal and governmental system are frankly beyond me (it strikes me that such anti-capitalist rumblings by Indian politicians attempt to distract from their long-term failure to set India up for growth), an important question that should be considered is the trade-off for consumers and for overall growth of cheap spectrum licenses. Communications are a proven multiplier for economic growth and on my last visit to India practically everyone was glued to their handset. If the same can happen with data phones in the future then the net effect on an economy the size of India's will far exceed the $39B they "lost" due to corruption. In any case, the supposed loss seems rather arbitrary, since no one in a developed economy would have paid that much for the spectrum on offer, let alone in one where ARPU is under $5. 1.2B people or not... Anyway, just my 2p...
Following yesterday's post, here's some related thinking on the impacts on operators of handset leasing. Handset sales represent around 25% of operator revenues in a typical European market, but generate only around 5% of margin. It may therefore be the case that the scenario described would lead operators to a more profitable structural model than exists today. Oil companies are consistently and acceptably profitable, despite being (literally in some cases) the ‘dumb pipe’ that operators are so desperate to avoid becoming. One of the reasons for the oil majors sustained profitability is clear focus on their role in the value chain – to supply the fuel that enables transportation, relying primarily on location, then brand and finally product innovation to compete. BP or Shell do not need to subsidise the purchase of a car in order to drive consumption of fuel because consumers are ‘hooked’ on it (it gets them from place to place) and there are many credible car manufacturers an...
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