Boston, MA -- (SBWIRE) -- 08/28/2012 -- BMI's latest report on the Indian telecoms market provides a comprehensive overview of the latest developments in the mobile, fixed-line telephony and internet sectors. We have incorporated latest data from the country's largest mobile operators, Bharti Airtel, Vodafone India and Reliance Communications, and the Telecommunication Regulatory Authority of India into our forecast scenarios.

The Indian mobile market experienced an increase in growth rate in Q112, although it remains significantly below levels reached one year ago. The market added 25.3mn subscribers in Q112, up from 20.2mn in Q411. This is despite a number of hurdles encountered in the market this quarter.

In April, Vodafone began taking action towards international arbitration of a dispute with India's government over a retroactive tax code change. The Indian government plans to issue Vodafone a demand notice for tax owed after the finance bill is passed by Parliament, according to local press reports citing two senior officials. The government had been pursuing Vodafone for taxes relating to the 2007 acquisition of a 67% stake in Hutchison Essar from Hong Kong-based Hutchison Whampoa for US$11.2bn. However, in January 2012 India's Supreme Court ended the four-year legal battle in Vodafone's favour. BMI expects Vodafone to battle against the renewed attempts to tax the transaction and we expect a lengthy legal process. The finance bill has wider implications for India's economy, with potential negative implications for foreign investment as long as uncertainty continues.

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In April 2012, the regulator announced 2G spectrum would be auctioned at US$687mn per MHz, 13 times the price it was auctioned for in 2008. The Supreme Court followed the announcement with a call to hold the auction by August 31 2012, far sooner than early 2013, which had originally been requested. The telecom secretary stated that the breakdown over the 20-year life of the licences justified the price. However, the markets and telecoms operators greeted the news badly. Further, the revocation of a number of 2G licences caused a series of disputes.

In May 2012 Augere decided to withdraw from the market due to difficulties in raising funds. The drawnout investigations and contentious measures to resolve issues have not aided investor confidence. Worryingly, BMI believes that the situation will continue to cast a shadow on the sector in 2012. According to Augere CEO Lars Henrick Stork, the firm's investors have been ruffled by the 2G scandal, in addition to the repeated delay in the unveiling of the New Telecom Policy, which was scheduled to be announced in 2011. As a result, its investors have halted funding.

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