3G Auctions


By Jagannadham Thunuguntla

The recent bidding of 3G auctions are so successful, that Government could able to garner about Rs 67,700 Crores in comparison to the budget estimates of about Rs 35,000 Crores. That’s almost double. Besides that, the Government could also be able to collect about Rs. 14,500 Crores as a one-time fee for 2G (though this amount is still under debate and is yet to be frozen). So, the total collection is a provisional figure to the tune of Rs 82,200 Crores. That’s a “wow” performance by the Government. But, in the process, there may be a victim (even though unrelated to telecom) in the form of: “the disinvestment activity”.

If someone watches the larger picture closely, as per the Budget estimates, the total collection expected from disinvestment is to the tune of Rs 40,000 Crores and from 3G auctions about Rs 35,000 Crores. So, the total is about Rs 75,000 Crores.

That means the total collection in the spectrum auctions alone of about Rs 82,200 Crores is more than the budget target of “3G” plus “disinvestment” put together. This naturally gives comfortable elbow room to the Government in positioning its disinvestment activity -- in other words, there is no necessity to rush for the execution of disinvestment. They can comfortably choose the time for disinvestment whenever they feel it to be right.

This is a situation of relief for Government, especially if one factors-in the current capital market conditions amidst of European chaos. Globally, several public issues have either been postponed or scrapped or reduced the price band. Hence, considering the considerable elbow room they have gained through 3G auctions, the Government may choose to slow-down on the disinvestment activity.
If they force the disinvestment today, they may able to get at best “fire sale” valuations – especially considering the large sizes of some of the public issuances in pipeline. Hence, they can choose to postpone the sale of their assets through disinvestment, to a point when the market will be again ready to offer healthy valuations.

The 3G auctions can prove to be “game changing” event for disinvestment – that’s strange, but that’s what it is. In the meanwhile, the officials in the Department of Disinvestment can choose to go for a well-deserving long vacation after a busy last year with NHPC IPO, OIL IPO, NTPC FPO, REC FPO, United Bank IPO, NMDC FPO and SJVNL IPO.

—The author is the Equity Head, SMC Capitals Limited and can be contacted at jt@smccapitals.com 

June 2010

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