The Telecom Earthquake

The Supreme Court's verdict, cancelling 122 telecom licenses that were sold in an wholly arbitrary and unconstitutional manner, comes as an earthquake to the world's largest telecommunications market. The verdict will see major players (Idea and Uninor) and minor players alike taking a beating, while the titans of the industry - Vodafone and Airtel - will see thei fortunes rise.

In a way, it is poetic justice. The entry of such a large number of players - illegally - caused massive bleeding. Consumers did benefit significantly of course, but if you look at it in the long-run, the industry had become unsustainable and that would hurt consumers the most. Therefore, the industry was crying out for consolidation and price-rationalization. The judgment does just that, except with a bang.

The exit of so many licensees will mean that the existing players will get close to 40 million new subscribers in a matter of months, thanks to MNP. Auction of spectrum will give some much-needed revenue to the Government. Stabilization of the industry will prove hugely beneficial to consumers in the long-run, although tariffs may rise in the short-run. With the new telecom policy in place, however, consumers should be protected.

It's just as well that this move came through a huge scam - it exposed the UPA Government for what it was worth without destabilizing the entire nation. Hopefully, future governments will think twice before attempting anything like this again.