Introduction
Following the issuance of the initial cellular licenses in 1994, which revealed several structural challenges, the government decided to expand the licensing framework by offering additional licenses in 1995. This time, the licensing process aimed to cover not only the metro cities but also the telecom circles across the country. The approach shifted from a “beauty contest” model to a competitive bidding model. While this change seemed like a logical progression towards more transparency and market-driven allocation, the new process introduced its own set of complexities and issues. The 1995 cellular licenses, granted through a tendering process, marked the beginning of bidding wars, speculative investments, and financial over-commitments that would set the stage for future challenges in the Indian telecom sector.
The 1995 Cellular Licensing Process
In December 1995, the government decided to issue 34 Cellular Mobile Telephone Service (CMTS) licenses across 18 telecom circles for a period of ten years. Unlike the 1994 metro licenses, these licenses were awarded through a competitive bidding process, where the highest bidder determined the license fee. The underlying intent of this auction-based approach was to generate substantial revenue for the government while ensuring that only serious players entered the market.
